INFLATION

HC Deb 18 July 1973 vol 860 cc498-623

4.9 p.m.

Mr. Harold Wilson (Huyton)

I beg to move, That this House has no confidence in the ability of Her Majesty's Government to control the rising price of food and the cost of other essentials, to maintain the value of the pound at home or abroad, and to create a fair and just society. I should be unduly taking the time of the House if I were to attempt to quote every pledge which the right hon. Gentleman the Prime Minister made in his election campaign on inflation. But one thing which he cannot deny is that it was on prices, and above all food prices, on which he won the election, and nothing else. He made other promises. of course. He made promises, which turned out to be false, on industrial relations, unemployment, Market terms of entry, housing, family allowances, fares and mortgages. But what won the election was prices, prices, prices—emphasised, reiterated, highlighted, in speech after speech. There were appeals to housewives, there were radio and television political broadcasts.

Especially were food prices emphasised. I can be restrictive in the figures I quote because they are all so well known. The retail price index has already risen by 27.2 per cent. and food prices by 36+ per cent., all in less than three years. There is more to come. The latest figures are to be announced this week. There is more, yet more, to come even at a time of the year when on seasonal grounds—this has happened under successive Governments—the cost of living is usually stable or even falls, between spring and late autumn. The wholesale price index was up a whole point between May and June. It is now 27 per cent. up on a year ago—in a single year, not in three years. That still has to work its way through into the shops.

I do not think that there is need to quote more figures. No one in Britain can acquit the Prime Minister of winning power on an utterly fraudulent prospectus. There can be only two explanations. The first, which is the more charitable, is that when he made these promises he hoped in some way to fulfil them. If that were so, the charge would simply be one of incompetence. The second is more serious—that when he made them he knew that, on the policies to which he was then committed, those promises would be broken. That convicts him not so much of incompetence as of electoral deception and fraud.

In all the subsequent welter of alibis and excuses, one thing stands out. The right hon. Gentleman no longer pretends, not even about the manifesto on which he fought. After the amusing little introduction which he signed himself, the Conservative Party manifesto said: We have become resigned to the value of the f in our pockets or purses falling by at least one shilling a year. That is 5 pence in the pound in modern currency. There has not been a single year since he took office when it has fallen by as little as 5 pence in the pound, and the rate of fall is increasing again, despite the fact that we have had a freeze for about six months.

In the 12 months ended June, which included six months of statutory freeze, the increase was not 5p in the pound, it was 9.6p in the pound—not one shilling in the pound but 1s. 11d. in the pound in the old currency.

Under the present Government, 5p in the pound-5 per cent.—has become not a reproach, as the right hon. Gentleman intended, but a rate of price restraint utterly beyond his power to achieve. It was the target he announced last September in his talks with the trade unions. He has doubled it. Perhaps he can tell us whether in the 12 months following the end of his freeze he has any confidence that he can keep the increase in price right down not to 5p in the pound but to 10p?

What answer has the right hon. Gentleman for the housewives? I might remind him of what he said at Leicester in June 1970. Referring to the housewives, he said: We will fight on their side. We are determined to put the brake on price rises…. We did it before—we will do it again. Putting a brake on? The trouble about the right hon. Gentleman is that he does not know his brake from his accelerator. He said that he would fight on the side of the housewives. In three years, the Prime Minister—I do not know whether he set out to do it—has broken many more trusting female hearts than Casanova did in a lifetime of dedication to their concerns. The difference with the right hon. Gentleman is that those whom Casanova betrayed at least had their memories to console them in their years of disillusionment.

All the housewives who were betrayed in 1970 have had is excuses and contrived alibis. In one month, it is the unions, and apparently this is an off month for them. In another month, it is world prices. But we heard nothing about world prices from the right hon. Gentleman in May and June 1970. What he fails to tell us is how much the cost in Britain of world commodities—food and raw materials—is due to his devaluation, which, at 16½ per cent., is now more than the devaluation of November 1967, on which the right hon. Gentleman so lovingly dwelt for so long.

The right hon. Gentleman does not tell us how much prices have risen in this country compared with other countries simply because of devaluation. He must have seen the chart in the Financial Times last week. This showed that, with a strong currency such as the Swiss franc, copper prices—copper is one of the raw material shave risen by about 19 per cent. over the past year, whereas the cost in sterling to British users is up by 77 per cent. The price in Japan was only up by 15 per cent. Why does he not admit that his Devaluation was a confession of failure, an admission that all the sacrifices of the British people over the last three years—the squeeze—the freeze—the stagnation in production, the deliberate increase in unemployment … has all been in vain. It was defeat and there is nothing for the government to be proud of in that…. This government keeps blaming everybody except themselves. I see that the Prime Minister looks a little perturbed because he knows that I am quoting his own devaluation broadcast in 1967. Every word of the confession of failure after three years of squeeze, freeze, stagnation in production and deliberate increase in unemployment reflects his own record. This Government keeps blaming everybody except themselves. Somehow they can never bring themselves to admit that they made a mistake. If they did perhaps people might respect them a bit more. And if they admitted their errors they might do something to put them right…. It really is nonsense to pretend that the decision to devalue is the consequence of a position three years ago. But that is what the right hon. Gentleman is telling us in all his speeches—that his devaluation was due to what happened three years ago. And now for the immediate consequences of devaluation. What will it mean to you? Prices will rise, your bread, your meat, your tinned goods, your petrol—they'll all cost you more. The right hon. Gentleman was prophetic.

With his new preoccupation with world prices, the right hon. Gentleman wants the country to forget the deliberate actions which the Government have taken to put prices up. It was not world prices which put up rents. It was not world prices which put up the rates. It was not world prices which put up bus and train fares and the prices of school meals and school milk. It was not world prices which raised prescription and dental charges and a whole host of other prices and charges in both public and private industry.

It was Government policy almost from the outset to force up prices in order to increase profits in our manufacturing industry. The Chancellor of the Exchequer will not deny that because he made it clear to financial journalists in September 1970. I hope that he will have a chance to deny it tonight if he can. The Guardian reported after his briefing: Tories to let prices go free. The Daily Telegraph said: Price rises to rebuild working capital. Companies may raise prices with tacit Government blessing. The Times said: The shortage of company liquidity is acknowledged, and it is argued that the solution lies in raising prices where this is necessary for maintaining profits, investments and working capital. That is what the Chancellor told the Press three months after the election.

In October 1970, we had the Chancellor's interim budget. In order to make some gesture towards redeeming the Government's tax pledges he announced cuts in Government expenditure whose main effect was to put up prices. That, of course, was before the Government discovered the easy way out that they have since discovered—the prerogative of the currency debaser and coin clipper throughout the ages—cutting taxes by printing more money, a great deal of it.

Labour Chancellors of the Exchequer were reducing the public debt by budgetary surpluses. The Government are borrowing, increasing the public debt and printing money not only at a record peace time rate but at a greater rate than the Coalition Government in the Second World War.

The Government embarked from the outset on a deliberate policy of increased food prices by levies on the housewife. They restored the Corn Laws. They decided to introduce VAT, in plain defiance of the Prime Minister's repudiation on election television that VAT was in his programme. If the right hon. Gentleman denies that let him say so later. He said that on television a week before the election.

The Government announced a policy to force up house rents and a timetable for decontrolling the private sector. They negotiated terms of entry into the EEC, which we denounced as crippling and certain to force up prices, which is what is happening. I always wanted to know during the election—and I had some difficulty about this—what was the Prime Minister's policy for inflation. He did not tell us this in the election except for one vague phrase in "A better Tomorrow", which I repeatedly asked him to explain—in vain. The Government would, said the right hon. Gentleman, rely in dealing with inflation on what he called "general pressures", whatever that meant.

We learnt quickly enough—the most Draconian money squeeze since 1931, applied during 1970 and 1971. There were cash flow crises for thousands of firms; the disgraceful Government default on small investors' holdings in the Mersey Docks and Harbours Board; bankruptcies, including the collapse of Rolls-Royce; the creation of an investment slump from which we are only now beginning to emerge two and a half years later; lay-offs and redundancies which Inflated the dole queues to over one million.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Would the right hon. Gentleman not say that those conditions of slump which he is describing were due to the Budgets of 1968 and 1969 which were highly deflationary as opposed to the 1970 and 1971 Budgets which were highly inflationary?

Mr. Wilson

No. I do not, of course, agree with that. The conditions I have described were due to the cash squeeze imposed by the Government when they came into office, and the hon. Gentleman was one of the casualties of that very sad period. As so often in the history of the Tory Party, we got the wrong casualties.

Today, as always, we hear a great deal about 5 per cent. growth. Let us examine the Prime Minister's growth plan. First let me say there is nothing clever in achieving more rapid growth when we are recovering from a figure of 1 million unemployed, deliberately induced. Had the Government pushed the unemployment to 2 million they might be boasting about a 10 per cent. growth rate in the period which followed.

Second, in such circumstances it is particularly easy to achieve growth for a time and at a price, if one prints money by borrowing at the rate of £4,000 million a year. There are distinguished Latin American precedents in support of that. Third, it is always possible to achieve growth for a time by blithely disregarding the balance of payments. Otherwise it will not last. The Labour Government had to transform an £800 million deficit to a £650 million surplus in 1970, which the right hon. Gentleman denied in election week, and of course we set the present Government on their way to a £1,000 million surplus in 1971—but at a cost.

What we had to do meant transferring resources from home consumption to exports and investment. The right hon. Gentleman has frittered away that £1,000 mil, lion surplus. On the basis of the figures for the past four months, when we had an average of £151 million a month deficit, this would mean a current visible trade deficit of £1,800 million and a current account deficit of £1,100 million—nearly three times as bad as the bequest to us in 1964 from the right hon. Member for Barnet (Mr. Maudling). Perhaps we were too unkind to the hon. Member. His successor, the present Chancellor, is running at the moment at nearly three times as bad as that. [An HON. MEMBER: "At 1964 prices."] Of course. I take the point. With the inflation going on under this Government it is necessary to knock a little bit off.

The trouble is that a large deficit has to be paid for. This Government which preached so sanctimoniously about IMF borrowing are borrowing now to finance their deficit. Public authorities, municipalities, public industries, all are being urged to borrow abroad. I am told that the Electricity Council alone has borrowed 1,000 million dollars. I hope that the Chancellor will confirm this and tell us how much in total has been borrowed in this way this year.

For how long can the rot be stemmed by borrowing, with the further devaluation of sterling, with the increase in European interest rates, the increase in American interest rates—always a bellwether—and the increase in other interest rates this week? For how long in conditions of a deficit can the Government hold on to the hot money attracted during the surplus with a floating currency and with interest rates abroad rising? What do the Government think will happen to interest rates here when the temporary VAT boost to company liquidity ends in a few weeks, as it must?

What will happen to building society mortgages? The building societies have already rejected the Prime Minister's appeal in this House to reduce the rates from their present all-time record level. Can they be held at 9½ per cent.? [Interruption.] The right hon. Gentleman made that appeal in this House. Can they be held at the present level? Gilt edged is at an all-time low, War Loan and Consols, the traditional test of national credit for 150 years or more, are now at their lowest ever under this Government.

The Conservative Party is now proclaimed by every traditional test as the party of unsound money. The fact is that the improvidence of the Conservative stewardship of the trade and payments balance is worsening inflation. The floating pound has not produced any easy answer. The hard law of economics means that we have to pay our way—which we did under a Labour Government.

One of the main reasons for their improvidence, for their refusal to take adequate measures to deal with prices, was the Government's obsession with the trade unions. Of course higher wages without higher productivity are an important factor in price increases. We have always said that, and it is particularly so in industries and services where wages or salary costs are a high proportion of total cost, the so-called labour-intensive industries on which I was pressing the right hon. Gentleman to produce a policy 18 months ago.

He has applied his mind to this. I think he has at various points suggested possible ways of dealing with the problem. Recent events have demonstrated that wages are not currently the main factor in inflation. The report of the "Rising Prices Commission", following its daily reports, shows that, with its emphasis on material costs. It attached a great deal of emphasis in its latest report to material costs. There is much more to come. The Commission has made clear how much more is in the pipeline.

It was the acquiescence, however reluctant, of the unions in accepting stage 2 which has brought it home to the country. The reluctant acquiescence of the unions in accepting stage 2 has brought right home to Downing Street the responsibility for the increase in living costs. The Prime Minister cannot blame either stage 1 or stage 2 price increases on the trade unions. During stage 1 prices rose more than earnings, with wages virtually frozen. The Prime Minister has dodged answering this week after week but he knows that it is a fact.

Hon. Gentlemen may not like to listen to this but most of them are here because of the pledges he gave and I would advise them that during the short time they will remain here they ought to listen to what has happened to those pledges.

Prices were rising during stage 1 at almost historically record rates. They have been rising, even during the freeze, faster even than in wartime. The Prime Minister has totally misled the House with his claims about real disposable income. It is no use for him to talk about the rise in real disposable income from June 1970 to last autumn. The whole purpose of his lurch in policy and the adoption of statutory wage control was to stop the continuation of the rise in real disposable income.

In stage 2 the Government's wage legislation was not working as they wanted it to work. It was working for wages but not for prices. Price control, so far as the principal components of an average households living costs are concerned, has proved a manifest farce, and the right hon. Gentleman knows it. In so far as real income was maintained in the first quarter of this year compared with the fourth quarter of last year, half of the cause of this was the increase in dividends during that quarter, dividends which are not shared among the sort of people to whom he was appealing in June 1970.

I wonder when the Prime Minister will learn that food and housing are the main items in the family budget—that the older one is the more it is food and the younger one is the more it is housing which enters into one's household costs. But action on these is specifically ruled out by Prime Ministerial diktat, because, as the right hon. Gentleman has said more than once in the House, action on food and, as we have suggested, action on housing, would be political.

The Government have been completely wrong about the food situation. In May and June last year there was great concern about beef prices. I called and others called for a ban on the export of cattle to Europe. The then Minister, now the Lord President of the Council, went on the BBC to reply to me. He rejected the proposal and then the following week he told the House that the situation should soon be remedied as more grass-fattened cattle became available. Three months later, when those ghostly quadrupeds had come and gone—mostly to Europe, as a matter of fact—the prices were still as high. This year, the present Minister has never even tried to raise hopes by reference to grass-fed cattle.

In the last 10 weeks—the period which the right hon. Gentleman had in mind last year—there has been a 1½ per cent. reduction in beef prices in this country, the smallest reduction of any of the nine members of the Common Market. Perhaps the Prime Minister will explain that. But the export of carcase meat goes on. Beef prices are appalling and are higher than they were a year ago. If there is in due course an easement in the price of beef because of the ban imposed last week on cattle exports, it will be not because of action by the Government but because of action by this House—action taken in defiance of the Government's advice, in defiance by some hon. Members of a three-line Whip, action taken in the main for reasons related not to prices but to concern about animal welfare.

But what does the contribution of the Minister of Agriculture—I do not see him in the Chamber—to the fulfilment of the Prime Minister's election pledges to put a brake on rising prices amount to—a pathetic wringing of hands combined with exhortations to the housewives. First, he said that they must shop around—easy advice. What about working wives? What about wives with young children? What about wives in areas such as villages or underserved estates with only one shop?

After that we had a further ineffable contribution from the right hon. Gentleman—his exhortations to abstinence: "If the price of beef is too high, do not buy beef". That is how it started—the road to ruin. Most families could not afford to buy beef anyway, so the price fell. But that was due to the housewives' forbearance. Perhaps they wanted to buy beef for their family. They used to be able to buy it when the Labour Government were in office. Then the price of pork, lamb and even of chickens went up, so still more comprehensive restraint was required of the housewives in the Minister's appeals. All those were supposed to be boycotted. Then after that it was fish. We had all those sanctimonious speeches from the Prime Minister praising the housewives: the little woman was magnificent. What he did not realise was that families wanted to buy these things, just as they were able to do in June 1970.

When the Government finally disappear below the horizon, they will be remembered for one contribution to economics—Godber's law: if we all stopped eating altogether, the cost of living index would go down to zero. Now that branch of the PR profession which infests Downing Street and Whitehall is hard at work on stage 3. Stage 1 and stage 2 have proved to be a confidence trick. That is not in question in any part of the House. But if the Prime Minister wants to make stage 3 work he must play straight with the country. Let me repeat what he should do—I say "repeat "because we have warned him all along that a prices and incomes policy which is not fair is not workable and Britain's economic survival cannot stand a further breakdown. I say "repeat "because we told him what he must do in the debate on floating more than a year ago, in the debate on industrial relations last July, in the debate on the Address last October, in the debate on stage 1 in November and in the debate on stage 2 in January.

First, the right hon. Gentleman must rid himself of his obsessional fixations about food and about housing. He must realise that he cannot hold the cost of living unless he tackles food prices. This must in present circumstances mean subsidies for the principal foodstuffs—bread, meat, butter, and so on. Our right to subsidise sugar has been attacked—and we had exchanges about it today—and even now it is continued for one year only. Let us hear no more from the Government about rationing. We have rationing now—rationing by the cruel dictates of the purse in a society where the distribution of income and of wealth is daily becoming more and more distorted and inequitable.

Let us hear less sob-stuff about the fact that subsidies would have to come out of tax revenue. Of course they would. But this argument does not lie in the mouths of a Government who this April—at the height of what the right hon. Gentleman amusingly called a freeze, a standstill—blithely handed out £300 million of income after tax, take-home spendable pay, to a better-off minority which in the main was finding no difficulty in paying for its food, even beef. It does not lie in the mouths of a Government who have equally irresponsibly committed hundreds of millions—whether derived from taxation or from levies on the housewife—as a burden on our balance of payments for the purposes of keeping European and British food prices up to quibble about the use of a similar amount to keep British prices down.

Why does the right hon. Gentleman refuse to do this? Ideology, because it would be political? Perhaps. Or is he precluded by the deal which he did at President Pompidou's footstool? The price of that deal rises almost every month.

A fortnight ago I asked the right hon. Gentleman about Press reports in The Sunday Telegraph that the EEC would forbid the use of subsidies. He disclaimed any knowledge. He said that he would look into the matter. Let him answer today: does he accept or repudiate the statement attributed to "Community sources "that Basically the Community does not allow any direct subsidies on food"? All that was permitted, the statement went on, were Community—wide subsidies on individual commodities.

On housing, the Government should categorically announce, as we asked them to do so before stage 1, that they will not enter into stage 3 with the rent increase requirements of the Housing Finance Acts in operation and that the further 50p rent levy due this October will not be extracted. The right hon. Gentleman may not have seen the first adjudication by the Rent Scrutiny Board, for an area in East Lancashire—Lees, near Oldham—where it has been laid down that the board's calculation of the ultimate fair rent may mean increases of up to 3+ times the starting rent. I hope that the right hon. Gentleman will deal with that matter today.

I also hope that the Prime Minister will announce that further decontrol of private housing rents will cease. We have seen reports that he is to propose a threshold pay formula. I do not wish to go On too long— [HON. MEMBERS: "Hear, hear."] We are all in agreement about that. The evening newspapers have asked my office how long I would speak because they are expecting a major announcement from the Prime Minister. There was some suggestion at lunchtime that the Prime Minister did not want to announce anything today but is believed to have been warned by party managers that it might be prudent for him to do something to relieve the anxieties of Government back-bench Members over rising prices before he sees them at a private meeting tomorrow evening. I hope that what I am pressing the right hon. Gentleman to announce will be announced in the next hour. Whether it will reach the Evening Standard in time, I do not know.

We have seen reports that the Prime Minister is to propose a threshold pay formula based on an index of food prices and house prices. So far as housing is concerned, he has a simple answer. Instead of taking away with his Rent Act hand something from all the families concerned and making it up in pay, why does he not stop the increase in local authority, new town and private house rents now, and do it for the duration, however long that may be?

The Government should also announce that, if there is to be any restraint in family incomes, mortgage interest rates will be reduced and then frozen. The cost of doing this will be the less if the Government will act severely to end the competitive anarchy in market interest rates introduced in 1971 in the last dying burst of Selsdonite freedom. We cannot deal with the problem of fair mortgage rates as long as we have that competitive anarchy in interest rates.

The Government should announce—I hope that I am helping the Prime Minister in preparing his speech—that they will take a grip on housing costs by legislation to abolish the lump system in the building industry. They should announce immediate action to deal with land speculation. They should announce a crisis tax on land and property speculation—that is to say, property already built—based on the proposals we have put forward. This should be introduced—and I give a guarantee to the Leader of the House that we will facilitate the legislation—as an interim measure before more fundamental legislation is introduced to take all potential building land into public ownership at prices close to existing use values.

This is necessary to stop the escalation of costs of both new and old houses. The latest figures published by Nationwide Building Society show that the cost of new houses has increased by exactly 100 per cent. since June 1970. There is not a single hon. Gentleman who did not fight the election on what the Prime Minister said about house prices. In the three years before June 1970 the price of new houses rose by 15 per cent. The Prime Minister will remember what he said about that. In the three years since June 1970 the price of new houses has risen by 100 per cent. Perhaps the Prime Minister will explain that today. It is all due, of course, to the Chinese wheat harvest.

We are told that the Prime Minister is now working on stage 3. We read daily of how his mind is said to be moving—no action on housing, no action even on help for the average family, merely an extension of the humiliating and restricted means-tested family income supplement.

What about the other families whom the right hon. Gentleman has betrayed by his repudiation of his election programme? During the election every hon. Member was specifically committed on family allowances. Is there any hon. Member who denies that pledge? Does the right hon. Gentleman deny that pledge? The Prime Minister during the election made a specific pledge in writing to the Child Poverty Action Group. His words were unequivocal. He said: We accept that as Mr. Macleod said in his Budget speech, the only way of tackling family poverty in the short term is to increase family allowances and operate the clawback principle… As Mr. Macleod said on 15th April, an increase of 10s. in family allowances would cost £30 million a year using the claw-back procedure. He said that £30 million a year was all that it would cost—what we are now about to be levied by the EEC on the butter mountain. He does that blithely, but why does not he use that £30 million for the purpose of fulfilling his pledge? Is there not one among the hard-faced men on the Government benches who feels bound by the pledge that the Prime Minister gave three years ago in an attempt to win votes? I hope he will tell us today that he will now redeem his pledge.

Despite the Prime Minister's claims, the percentage increase in pensions since June 1970 is less than the percentage increase in food prices, and the gap will widen. He keeps on talking about what the pension will be in October, but why does not he increase pensions now and not wait until October? If he says that he cannot get the pension books ready before October, what about another £10 bonus? He thought of that last year. Last December he speeded up the payment of £80 million to pensioners, so that it could be paid in the week of the Sutton and Uxbridge by-elections. He has two by-elections on his hands now. Is it not fair that the old-age pensioners should receive another £10 to help him to win those by-elections?

In a few days time the right hon. Gentleman meets the TUC and the CBI. All the signs are that the talks will be directed not to food, not to housing, not to the problems of the average family, but to wages. Let me tell him. Price policy is becoming a farce. The wage policy faces breakdown, and it will break down not through strikes by workers but through strikes by employers.

All experience—our experience, American experience—proves that a tight and rigid statutory policy can be held only for a few months before anomalies and inequities between man and man destroy it and before such distortions wreck production and essential services. Already employers—employers making essential components, pressings or extensions for our export industries—are losing labour to factories with a higher take-home pay and are being forced to every kind of subterfuge—the sheer evasion of wage regulations, the regarding of jobs which have been established for years and are now given new descriptions to hold labour, and still more subterfuge to recruit new labour.

That has an effect not only on our production industries but also on essential services. In London and elsewhere essential services are approaching paralysis. Buses are taken off the roads, trains are marooned in depots and soon it will be the essential local authority services and the health and hospital services which will be the casualties.

The right hon. Gentleman has to work out an incomes policy as well. He has to do that against a profits background such as the one shown in this weeks edition of The Sunday Times. He will not deny the figures. The Sunday Times figures showed that profits declared over the past year are 19.7 per cent. up on the previous year. Profits declared last week—the week ending 13th July—are 49.1 per cent. upon the previous year.

The trouble is that the right hon. Gentleman is acting on a narrow but deeply sensitive area of incomes for millions of households, while ordinary people are increasingly affronted and sickened by the kind of society his Government exist to perpetuate and extend. He does not impress anyone with his cynical strictures—script writers' performances—about the unpleasant and unacceptable face of capitalism. He was referring to Lonrho, but when in the case to which he referred the unacceptable face of capitalism was enthusiastically accepted and endorsed by the card vote of the Lonrho shareholders by 29 million to five the right hon. Gentleman took no action.

So it is with land and property speculation—that is an affront not only to those who are vainly seeking a home at reasonable cost against all the economic power of a gazumping society, but to those who want to see Britain sharing wealth, sharing economic power, sharing whatever sacrifices have to be made and sharing them as one nation, repudiating the divided Britain into which the Prime Minister's economic and social obsessions have plunged her.

I end with this—[HON. MEMBERS: "Hear, hear."]—I can understand the hon. Gentlemen's relief. In consonance with my normal humanity, especially for hon. Gentlemen on the Government benches, I have been extremely sparing this afternoon in quoting pledges on which hon. Gentlemen were elected in the last election.

We have set out our proposals for dealing with speculation in property, in bricks and mortar and concrete where, as we have heard on television, men can boast of a profit of a quarter of a million pounds in an afternoon without adding one iota of wealth or welfare to the national patrimony. We have set out our proposals for dealing with speculation now going on in agricultural land at the expense of the independent working farmer—the seizure of a stake in still higher food prices.

The right hon. Gentleman is perpetuating, extending and even appears to be glorying in a system of society where money breeds money, paper wealth creates paper wealth, for those who already enjoy that wealth—the creation of vast financial empires, where profits are made by dealings between subsidiaries the buying power of one to create illusory values in others, so that the empire as a whole can write up its paper wealth; the sacrifice of productive industry for inordinate gains, gains which do not create wealth, or investment, or exports, or employment, but create only redundancies—gains which come from asset-stripping and the exploitation of property values in a sick society.

The Prime Minister must stand up today, not only to justify a hundred reversals of policy, a hundred betrayals of election pledges; he has to justify still more the meretricious society which is all that "The Better Tomorrow" has become. He must justify the unparalleled influence of both domestic and multi-national corporations, accountable to no authority—not even to their shareholders except in rare cases of board-room crisis—least of all accountable to the requirements of the national interest.

Within the narrow and twisted confines of the only policies he is capable of appreciating, the right hon. Gentleman has only a limited space now in which to manoeuvre. On the real issues which dominate the society in which we live, he and his Government have forfeited any claim to lead. I call on the House to record our total lack of confidence in him and in his Government. He may today be supported by well-whipped Members elected on the same deceptive prospectus as that which created him. But, as we vote, we anticipate the emphatic vote of no confidence with which the country stands ready to condemn him, his Government and all their works.

4.52 p.m.

The Prime Minister (Mr. Edward Heath)

No Government in modern times have shown themselves more ready to carry through intensive discussions about the management of the whole economy with all those concerned in it than have Her Majesty's Government. This was shown in particular in the discussions with the CBI and TUC which all parties will agree were the most concentrated which any Government have ever carried through.

This afternoon I propose to discuss some of the matters which the right hon. Gentleman the Leader of the Opposition has raised and to deal with them. He has complained of many things, and among them that 1 did not in June 1970 say anything about rising world prices. That is perfectly true, and for a very good reason. World prices were not rising in 1970. [Interruption.]

Mr. William Hamilton (Fife, West)

You are a fraud.

The Prime Minister

That was not the problem with which the right hon. Gentleman had to deal. Indeed during his term of office of six years the commodity index of the things we have to buy from abroad was stable, whereas the rise in commodity prices that we have recently suffered is far more dramatic than anything since the Korean War.

I fully recognise that there are some people in this House, not limited to the Labour benches, who say that this is not so—they challenge the facts, but the figures are there for them to see—or they argue that this consideration is not important. Anybody who tries to maintain such a view must be living in a world of fantasy. Compared with a year ago we are having to pay 64 per cent. more for our copper, 89 per cent. more for our wheat, 155 per cent. more for our wool, and the Economist shows an average increase of 70 per cent, on all commodities. Allowing for the floating of the pound, obviously these are major increases in the principal commodities which we buy.

Nobody with any knowledge of the real world can lay the blame for rises of this magnitude in world prices on the floating of the pound or on the state of money supply in this country. These increases are greatly benefiting the developing world which has been yearning for them for many years, and there are hon. Members on both sides of the House who from time to time at UNCTAD and elsewhere have tried to reach reasonable arrangements which would benefit the developing world. But let us by no means underestimate the acute problems which these are now producing for the industrialised nations of the West. No critic who seeks this debate to discuss economic policy can be taken seriously if he does not first recognise this basic situation.

I should like to put a question to the right hon. Gentleman, the Leader of the Opposition. Is he saying that the increases in the world prices of raw materials, even allowing for the floating of sterling, are not to be allowed for in the system of price control which has been introduced and which is now being operated? This system of price control is the strictest this country has ever had, and it is absolutely right that increased costs of raw materials should be taken into account. But they must be strictly taken into account in applications for price increases.

I want to deal with the point raised by the right hon. Gentleman about the position of the European Community in relation to imported raw materials and foodstuffs. The estimate we previously gave to the House was that the effect of our entry into the Community would be to increase the price of food in this country by 2 per cent. in each year of the transitional period. That estimate has proved to be inaccurate this year because it is too high. The effect of Community membership on food prices so far this year is less than 1 per cent. This compares with an increase in the cost of food imports generally over the last year of 25 per cent. This is partly because world prices are in general far above Cornmunity prices as they apply this year in the United Kingdom.

Mr. Charles Loughlin (Gloucestershire, West)

What about the butter mountain?

The Prime Minister

As I said in the House yesterday, soft wheat has been costing us about £50 a ton in world markets compared with the intervention price of less than £30 a ton in the Community. It is impossible in these circumstances to blame entry into Europe for the price of wheat. Similarly with beef, the market price of cattle has been over £18 a hundredweight in terms of the world price compared with the average intervention price of just over 15 in the Community. It is impossible to blame the Community for the price of our purchases in the world at large.

The estimate for future years will depend not only on the future movement of world prices but on a review of common agricultural policy which we are now helping to carry out. Therefore, it is thoroughly dishonest for anybody to pretend that the higher level of commodity prices which we are having to pay is due to our entry into the Community. The fact is that we are faced with rises of world prices such as the Labour Government never had to encounter.

There was one problem which the right hon. Gentleman during his time in office had to face, as he acknowledged today. He recognised time and again that the main cause of inflation during that period was the tendency of wages and salaries to rise faster than was justified by the state of the economy—

Mr. Harold Wilson

And profits.

The Prime Minister

If the right hon. Gentleman wishes to qualify what I am saying by one factor, he must surely outline what the other factors were. It was not profits. The share that was going to profits was depressed during Labour's tour of office. The right hon. Gentleman tried to conquer the enemy of price rises caused by excessive wage increases. He tried using the weapons of wage control and price control—but, above all, he tried deflation. In some respects his measures had something in common with ours. In particular he decided that it was not possible to try to control fresh food prices, even though in his situation it would have been much easier to do that than it is today. But in one vital respect this approach was entirely contrary to the one Her Majesty's Government are following. The right hon. Gentleman believed in and carried through successfully a deliberate attempt to depress the standard of living of the British people. He did it through deflation—

Mr. Wilson

The Prime Minister is doing it now.

The Prime Minister

—and we have had a lot of argument in recent weeks about the standard of living. But the argument has been about how fast the standard of living has risen in the past three years, and about whether it stopped rising temporarily in the first quarter of this year during the freeze after a long period in which it had risen rapidly. The argument six or seven years ago was not about how fast the standard of living was rising but about how fast it was falling. There was, for example, a fall in the standard of living between the first and second halves of 1966. It was a fall of 2¾ per cent. in that period alone. What the Opposition cannot deny is that, taking the six years of their Government together, the real standard of living rose by 8½ per cent. whereas in our three years—half the time—the rise is already more than 13 per cent. They cannot deny this.

There is a fundamental difference of philosophy here between the Labour Government, who tried to solve the economic problems of the country by restriction, and a Government who are certain that these problems can be solved only by bringing about a sustained increase in the rate of economic expansion. That is the policy being pursued by Her Majesty's Government. It has the full support of the TUC. It has the full support of the CBI. I believe that it has the full support of the great mass of the people of this country.

Here I want to ask the Leader of the Opposition another question. Does he support this policy of a sustained expansion of the economy or does he reject it?

Let him say where he stands. If he supports it, is he prepared also to support the measures which have to be pursued in consequence—the demands upon the balance of payments at this stage of the expansion of the economy, the measures required to overcome any shortages of labour or skills as they emerge, and the necessity for profitability to be sufficient to cover investment for further expansion? In supporting expansion, does the right hon. Gentleman also support the consequences of it? All these are an essential part of the pattern of an expanding economy, and it is only from them that there can emerge a sustained improvement in the real standard of living of our people.

The right hon. Gentleman has again raised the question of housing. He says that I issued a diktat forbidding any action because it was political. Nothing could be further from the truth. What is more, we took action operative in stage 1 to deal with this. The difference is a very clear one of philosophy which now apparently exists between the two sides.

It was agreed in the talks with the TUC and the CBI—and it has been reaffirmed in the talks that we have just started—that one of the primary objectives was to help the lower paid. What we have done is to increase the needs allowance to ensure that those who are below average earnings receive the help that they ought to have. This was a policy which was supported by the Labour Government. It was supported especially by the right hon. Member for Coventry, East (Mr. Crossman) when he was Minister of Housing and Local Government.

Is the Leader of the Opposition saying that no matter what are the earnings of those in our higher paid industries—those, as we know, with their high earnings in the motor industry and those, as we heard in the statement the other day, in printing and getting £75 a week by day and £95 by night—they are not in a position to pay a fair rent for the housing which they occupy—

Mr. Harold Wilson rose—

The Prime Minister

Is the right hon. Gentleman saying that those who are receiving pensions which we are trying to increase must also be prepared through the rates to support unfair rents for those who have very high earnings? That is the difference between us, and the right hon. Gentleman ought to acknowledge honestly that it is a difference of philosophy. It is not a difference of action in terms of housing.

Mr. Wilson

The right hon. Gentleman said that I misrepresented him about his refusal to deal with these matters because they were political. He will find the authority for what I said in column 630 of HANSARD for 6th November last year which sets out clearly his words on this matter.

On housing, what the right hon. Gentleman is running away from is that the cost of housing in general, even when he has made all his allowances for means testing, rent rebates and so on, has gone up very considerably whether he is talking about public authority housing, private housing, or above all about the difficulty for young couples to whom he made such an appeal in the election to find the cost of new housing, which has doubled under this administration, quite apart from mortgage difficulties. Will the right hon. Gentleman address himself to those questions?

The Prime Minister

Perhaps the right hon. Gentleman will first address himself to the point that I was making which concerned rented accommodation and the fixing of fair rents and helping those who are low paid. I asked the right hon. Gentleman to say whether he is suggesting that, no matter what are the earnings of those who occupy rented accommodation, they are not to pay fair rents but are to be subsidised by other ratepayers including those who are lower paid. That is the point at issue.

As for the cost of housing, it is widely recognised that because of the increase in savings and the way that they were used by those who had them at their disposal, the cost of private housing has risen, as have construction costs, and that what is now required is to take account of that in the way in which it is reflected in rents and in what we are doing to help the low paid.

Mr. Frank Allaun (Salford, East)

How can the Prime Minister give this excuse of rent rebates when he knows that the great majority of tenants will get no rebate at all? How can he square these deliberate, unnecessary and further increases in rents coming in October for millions of families with his pretence of; struggling against the higher cost of living?

The Prime Minister

I am afraid that the hon. Gentleman is completely mistaken. I have constantly given the figures for the impact of the last increased needs allowance, which took up the figure to £35 a week, which was roughly the average industrial wage at that time. It is our policy to help through the needs allowance those who most need the help. It is a policy that we shall continue.

I ask the Leader of the Opposition not to go on repeating that no action has been taken about those occupying rented accommodation, because we have extended it to privately rented accommodation as well.

I turn now to food subsidies, with which the Leader of the Opposition dealt at some length. Here there is room for some confusion about what is being proposed from the Opposition Front Bench. On the Saturday before last the Deputy Leader of the Opposition made a speech, I think at Belper, in which he announced a specific set of measures dealing with food subsidies. I do not know what the status of those proposals can be, especially after some of the remarks today of the Leader of the Opposition. But I shall take the remarks of the Deputy Leader as being authoritative. They are very strange.

The Leader of the Opposition and his right hon. and hon. Friends have made a great deal of noise about rises in the prices of beef, lamb, fish, fruit and vegetables. In view of that, one would naturally expect the Deputy Leader of the Opposition to deal with these matters when making his speech. In fact they are wholly excluded. That may mean that the Labour Party has now recognised that if commodities which from time to time are in short supply are subsidised, the only result is to make the shortage worse. So, whatever the reason, the Labour Party apparently does not propose to subsidise any of the articles omitted from the speech of the Deputy Leader of the Opposition.

It is an extraordinary conflict that we see between the Leader of the Opposition and his Deputy—

Mr. Edward Short (Newcastle-upon-Tyne, Central) rose—

The Prime Minister

Before giving way to the right hon. Gentleman, perhaps I had better finish dealing with his speech. I have some more comments to make about it. As I say, there is nothing for beef, lamb, fish, fruit and vegetables. So let us have a period of silence from the Opposition about the prices of these items. They did not deal with them in the past, and they have no intention of dealing with them in the future.

Even as recently as today the right hon. Gentleman made another contribution. In an interview today he said: We are now denied access to the world surplus of cheap food. The interviewer asked, Where is this cheap food? to which the right hon. Gentleman replied: There are many areas of cheap food. Then, as I understand it, after a considerable pause, he said: There is cheap poultry in America, there are cheap pork pig products in Poland to which we do not have access. Naturally, I inquired into this matter. The position relating to poultry in the United States is that the price now is roughly 50 per cent. higher than a year ago and is similar to the price on the United Kingdom market. Of course, it cannot be exported. If it were, we would have to put on the cost of transport.

I was also interested in pig products in Poland, so I have looked into the matter. Apparently—this has now been checked—there are no significant sources of cheap pig meat available anywhere outside the Community. As to the result of our going into the Community denying us this pig meat and it costing more, it is interesting that our charges against non-Community pig meat imports are in many cases lower than they would have been if we were still operating the tariffs that we applied before we adopted the common agricultural policy.

Mr. Edward Short

I am flattered that the right hon. Gentleman has devoted this part of his speech to my comments. I shall devote the whole of my speech to him. In my speech at Belper I said that I would give examples of the cost of subsidies on certain items of food. I gave the cost of subsidies at a given rate on certain items, and that is all.

The Prime Minister

Obviously that was all. Is it not strange that beef, lamb, fish, fruit and vegetables were not mentioned in the right lion. Gentleman's list? Let him stand up now and say whether he would subsidise fish, fruit and vegetables, lamb and beef.

Mr. Harold Wilson

These are the very items mentioned by the right hon. Gentleman in his speech to the housewives of Leicester. What is he going to do about them?

The Prime Minister

The same as the right hon. Gentleman. We are not going in for massive food subsidies on these items.

Perhaps I might come to the items that the Deputy Leader of the Opposition—

Mr. Wilson

Answer.

The Prime Minister

If the right hon. Gentleman stopped bellowing he might be able to hear the answer.

I want to deal with the specific products mentioned by the Deputy Leader of the Opposition. He mentioned butter, which is now considerably cheaper than a year ago and to which we are applying the Community subsidy. He mentioned cheese, margarine and cooking fats, where there has been little change over the past year. He mentioned milk, and we have held the price of milk unchanged since last August. He mentioned bacon prices, which have recently fallen by £100 a ton, and poultry, which has risen by far less than other meats. He is taking the worst possible position in going for the commodities where prices have been stable or are beginning to fall and saying that these—

Mr. Harold Wilson rose—

The Prime Minister

—are the places—

Mr. Wilson

What about the price of bacon in the shops?

The Prime Minister

I am coming on to deal with the price of bacon in the shops—where he wishes to introduce a subsidy system. In order to raise £500 million, as the right hon. Gentleman said, it would mean an extra 45p a week off the take-home pay of the married man on £35 a week. The right hon. Gentleman talked about tax changes. The Budget of 1972 produced the biggest tax changes of all, with the £ 1 addition in the pay packet of every worker in the country for every week of the year.

The right hon. Gentleman tries to make out that this is some matter of dogma. We have used selective subsidies for sugar, potatoes and milk, which we are still doing, and for butter within the Community.

I have looked into the matter of the statement in the Daily Telegraph. That was not the Community spokesman's view; it was the newsman's interpretation of the relevant Articles of the Treaty to which he was referred. The fact that we are carrying on with action on milk and that the Community is acting on butter shows that the interpretation that he puts upon it, which was a very rigid interpretation, does not hold water.

We should not forget, when the right hon. Gentleman suggests that there is a dogmatic approach here—because those with whom we have discussions do not forget—that prices in the nationalised industries have been kept down deliberately in order to help with the prices of fuel, of power and of transport, amounting now to £300 million a year. I understand that some of my hon. Friends are critical of this aspect of the nationalised industries, but the criticism certainly does not lie in the mouths of right hon. and hon. Gentlemen opposite when that amount of money from public funds is being used to prevent increases in prices in the nationalised industries.

Those who advocate a massive system of food subsidies cannot in all honesty do so without accepting the risk of rationing for foods in short supply. If the right hon. Gentleman says it is all right for food to be rationed, is he also saying that he would prefer it to be rationed by the coupon? We should be quite plain about that. It would also mean a massive increase in taxation to deal with the major items which are sometimes mentioned, but which were not touched upon by the Deputy Leader of the Opposition. We must also make it clear that, whatever we do, this form of consumer subsidy will not affect world prices by one penny.

I want to deal now with the other aspect raised by the right hon. Gentleman on pay and wages. Nobody has worked harder than this Government for a voluntary agreement.

Mr. Harold Wilson

When I mentioned bacon just now, the right hon. Gentleman said that he was coming to the price of bacon in the shops. He seems to have gone from bacon to pay. Will he tell us what price he is now paying for bacon in the shops compared with what he said to the housewives of Leicester?

The Prime Minister

I said that bacon is £100 a ton cheaper than it was. That is not the point at which to start subsidising it. I shall deal with bacon later.

I turn now to voluntary arrangements. We worked hard, and those who worked with us accepted our good faith. We wanted a voluntary agreement on both pay and prices. I still believe, and others concerned in the talks believe, that in a reasonable democratic society such a voluntary agreement ought to be possible.

Mr. Dennis Skinner (Bolsover)

It is not reasonable.

The Prime Minister

We believe that in certain circumstances it could be effective. But we have learned from experience in recent years. One lesson we have learned is that it is just not possible to claim today that we could have a satisfactory policy against inflation which did not include watertight assurances that wages and salaries would be kept within acceptable bounds. This is the hard lesson that we have now learned. We should not allow ourselves to be so blinded by recent events in world commodity markets that we forget that wages and salaries are still twice as important as imports in the makeup of costs and prices. So the need for an orderly movement on pay increases will still remain when the surge in world price increases abates.

The right hon. Gentleman learned this the hard way and, as I have said, so have we. The difference between us is that the right hon. Gentleman appears to have forgotten the lesson that he learned. Any set of proposals for countering inflation which does not deal with the problem of excessive wage claims is bound to be fraudulent. What is more, it no longer has any chance of convincing the people of this country that it is a viable proposition. The result of the policies as they have been put forward by the Leader of the Opposition would be to pile one type of inflation on top of another—they would pile wage inflation on top of rising world prices. Because inflation stemming from world prices is to a large extent beyond our control, that is no reason for allowing wage inflation to be added to it.

Mr. Eric S. Heffer (Liverpool, Walton)

The right hon. Gentleman is arguing against the policies which I heard him put from this side of the House when the Labour Government were in office. At that time the right hon. Gentleman argued strongly and convincingly that a wages policy was totally wrong and unnecessary, and that we did not require such a policy. Why is it that now, without any explanation for the basic change in his attitude, the right hon. Gentleman is arguing for something that he did not believe applied to the country in 1970?

The Prime Minister

I have repeated that I believe it ought to be possible to get a voluntary policy. We still believe that in a reasonable democratic society such a voluntary agreement ought to be possible, and we believe that in certain circumstances it could be effective. When we failed to achieve such a voluntary policy, I told the House quite openly that we were going to move to statutory control.

We are now continuing talks with the objective of finding a voluntary policy, but the point that I wish to make—and I shall repeat in because of its importance—is that any set of proposals for counter-inflation must have an absolutely watertight arrangement so that wages and incomes cannot rise excessively.

Mr. Roy Jenkins (Birmingham, Stechford)

The right hon. Gentleman said that he and the Government had learned the hard way. Is the right hon. Gentleman saying that if he had had the knowledge and experience that he now has of the effect of incomes on prices and the movement of world prices he would not have made the statement which he made to the country and which formed the core of the political issue in the election of 1970?

The Prime Minister

With respect, it did not form the core. This matter had been discussed in Parliament for many years before that. I adhere to the belief that I have stated today, and we shall work in this present lot of talks for a voluntary agreement. If there can be a watertight arrangement it can be accepted.

We cannot affect world prices by shifting money from the pocket of the taxpayer to that of the consumer, but we can maintain the expansion of the economy and control our costs so that we are competitive in world markets. Then we can earn through our growth of exports the higher prices that we have to pay for our imports, and then, too, we shall have a stronger pound, and that in its turn will reduce the domestic price of our imports.

The House knows that we are going into further meetings with the TUC on 27th July and the CBI on 30th July. We have already agreed on specific subjects for discussion at these meetings. The work is being done by all three parties to the talks in preparation for them. We shall then want to extend the talks to cover further matters of wider interest as we prepare the ground for stage 3 of the counter-inflation programme.

By 15th September at the latest we shall have the report of the Pay Board on anomalies. It is because we have learned from the right hon. Gentleman's experience of operating a policy of this kind that we have arranged to deal with anomalies in a rational and orderly fashion. This has been welcomed by both employers and unions, and it is something that was lacking before. Then we shall be able to look at the economic outlook in preparation for stage 3.

I believe that in the course of the last year we have made two important steps forward in dealing with inflation. First, we have expanded the economy steadily at a substantial rate. Secondly, as a nation we have accepted the truth that excessive pay increases can lead only to higher inflation. What we have to do now is to build upon that and, indeed, to improve the arrangements that we have made, which we can do during these discussions, both on the pay and the prices side.

It is obviously too early, and it would not be right before other parties have contributed to the discussion, to say what shape stage 3 will take. That will obviously depend on the proposals upon which they themselves are working, but I hope—indeed, I believe that it is essential—that the arrangements that we achieve will make allowance for increased flexibility. I am quite clear that most trade union leaders and, indeed, the British people do not want to return to a position where they feel that there is a free-for-all, with no protection against prices being pushed up, and the economically weaker section of the community going to the wall. That is their view.

The right hon. Gentleman also touched on the fact that there are supposed to be these large numbers of people moving about and defying the arrangements. That is not our experience. I have inquired about this from the Department of Employment, and I am told that there has been no major change in movements during stage 2. There may be individual examples, but there is no general evidence of a movement of the kind referred to by the right hon. Gentleman. But this is one matter that must be watched carefully, and I hope that there will be flexibility in stage 3.

Subject to that, I want to say more about the Government's approach to pay and prices. First, it is true that earnings have gone up a great deal faster than prices. From June 1970 to April 1973 prices rose by just over 26 per cent., while average earnings rose by just under 38 per cent. The rapid expansion of the economy itself has given many people the opportunity to increase their earnings, quite apart from the level of their basic wage or salary, and we have concentrated by agreement on the position of the lower paid.

Nevertheless, there is a risk that the lower paid in particular may not be properly protected at a time when world prices are rising exceptionally rapidly. That is the point that the TUC has made to us with great force in relation to both workers and pensioners, and it is entirely legitimate that it should do so.

We have been able to safeguard the position of the pensioner in this respect. The right hon. Gentleman has taken to comparing increases in the food index with the total amount of increase in pensioners' incomes. It is well known that the percentage of a pensioner's income spent on food is higher than that of the average in the nation, but I doubt whether it is more than 40 per cent. which is the usual figure that is given, and therefore the comparison ought to be like with like, which is the total index against the total increase in the pension.

By the time the next pension increase is paid in October, pensions will have gone up by 55p in the pound since November 1969, compared with a rise in the cost of living of 33½ per cent. since then, and that leaves out of account the bonus to which the right hon. Gentleman referred. It also leaves out of account the fact that pensions are increased every year and the fact that under this Government, for the first time thousands of very old people are now receiving pensions.

With regard to wage and salary earners, we allowed for a substantial increase in stage 2, averaging 7 per cent. to 8 per cent. These were below the very large increases made before the standstill, which have meanwhile been working through into prices. That was inevitable. Since November of last year the retail price index has risen by just over 5 per cent., but earnings have risen faster than prices compared with a year ago. The April earnings figure showed a rise in earnings of 13.4 per cent. on a year earlier, compared with an increase of 9.2 per cent. in prices. I can tell the House that the May figure of earnings which is to be published this afternoon shows a larger margin in favour of earnings. It is clear, therefore, that the earnings index in May was once again rising faster than prices, and in an expanding economy one expects that people's earnings should be increasing substantially and steadily.

We can handle the complexities of these problems in a number of different ways. We can take special measures to deal with prices through the Price Commission. We can help selectively with certain foodstuffs, as I have already mentioned. We can help particular groups in the community who are especially vulnerable to price rises. All these are matters for further discussion with the TUC and the CBI, and then action.

At the same time we have to make arrangements for the period following stage 2. We want these to be known to all those working in industry in good time for their future planning.

We believe that we can help here by working out a procedure for safeguarding the improvement in the real standard of living which we all wish to see. But taking all of these different aspects together—and this is a matter of balance, to be discussed with those concerned as well as in the House—together they must not amount to more than the expanding economy can stand.

There are those who put to us, quite rightly, the view that rather than having a pension which is improving steadily in real terms there ought to be a jacking up, to make it comparable with the level in European countries or elsewhere. That is an example of matters which can all be discussed and considered. But it has to be recognised that in doing this one is making real demands on resources in this country, and together with the other action we are taking on incomes and salaries it must not exceed the expanding economy.

In the past two years we have done a great deal of work on the kind of safeguard which could be adopted, and one method of safeguarding pay increases against uncertain prospects for prices is what is known, as the House well understands, as threshold agreements. We all know how uncertain forecasts are, especially when they have to cover movements of world prices. The quality of threshold agreements is that they provide a firm reassurance which could only otherwise be provided by pressing for a much higher settlement. If prices rise above a certain fixed amount, then the agreement is triggered. An addition to pay is automatically provided to protect the real value of earnings which was intended in the settlement.

The Government put forward the possibility of providing for such agreements in the talks last autumn with the TUC and the CBI. At that time there was no detailed discussion, although work had been done in the NEDC, and there was not great interest in the concept. We have now concluded, as a Government, that we should positively propose to our partners in the talks about stage 3 that this type of agreement should be allowed for as a part of the machinery, because its value in preventing anxiety about the erosion of wage settlements will be very great. It should conduce to orderly negotiation and to industrial peace.

It is right that the level of the safeguard and the exact means of negotiating it should be discussed in future meetings with the TUC and the CBI, unions and employers, who are concerned with negotiation. The details can be settled in the light of the circumstances in the autumn. When the Counter Inflation Bill went through the House we understood. consult opinion in this House about the proposals.

Secondly, on prices, of course the machinery concentrates attention on individual price increases. But it is right to look at what this amounts to. In May—the latest month for which the prices figure is available—the increase in the retail price index for foods manufactured in the United Kingdom was 0.2 per cent.

Mr. Skinner

Tell that to the battered housewives.

The Prime Minister

As I told the House yesterday, since the standstill was introduced in November 1972, overall, these manufactured foods have fallen by 0.2 per cent., despite the very rapid increase in the price of raw materials over this period.

I should have thought it right to pay tribute to the food manufacturers for this, because their record is hardly consistent with the image of people who are concerned to extract every price increase which the code allows.

It is also right to look at what does not go through. The code does not permit all cost increases to be passed on in prices. There is a productivity deduction which means that manufacturers have to absorb no less than half of the increase in their labour costs. But I say to some of my hon. Friends that there is sufficient productivity increase retained to give an incentive to further production and to investment. Nearly two-thirds of all applications made and half of those on manufactured foods have been rejected. withdrawn or modified.

Anyone who thinks that this is a farce—as the right hon. Gentleman has said, following an earlier speaker outside the House—ought to take into consideration the Price Commission's own comment that in the first two months it has saved the consumer £44 million a year purely on the applications that it has considered from the companies which have referred them to it, completely ignoring other groups outside who are governing their prices accordingly.

For stage 3 we shall look at the price code again and at its operation, and we are fully prepared to consider comments on it. But there are ways in which we can make further use of the existing code, as the Price Commission's staff grows and as it gets past the first rush of applications with all the additional work which the establishment of the new machinery brought.

The Chairman of the Commission is now undertaking a three-point plan for action in addition to what has already been done. The Commission has been preoccupied so far with the largest companies. It is now starting to deal with the medium-sized companies, which are bound to report their price increases and profit margins. Where the check on the information coming in reveals that price increases have been made which are not justified, the Government will support the Price Commission in having them rolled back.

Secondly, the code prohibits increases where the result would be to increase companies' profit margins above the level in the reference years. and indeed, may require reductions. This provision has already prevented some price applications from companies in the top category from going through and has resulted in others being cut down. The Commission will now take all the steps that it can to ensure that all firms are aware of this provision of the code. This again is another aspect which will be covered by the Commission in checks on the smaller companies.

At this stage of expansion some recovery of profits is to be expected. Again, that has been criticised by the right hon. Gentleman. Let me give the House the figures. After deducting stock appreciation, the share of gross trading profits in total domestic income was 11 per cent. in the six months to the end of March. From that all investment has to come. For the 1960s as a whole, including the right hon. Gentleman's administration, the average was 13.8 per cent. The present percentage, therefore, shows low profitability compared with the decade during which the right hon. Gentleman was in office for six years

Thirdly, the Commission, through its regional organisation, is starting a programme of checks on retail and service establishments. In addition, the regional offices have embarked upon test inquiries to find out whether the big fall in wholesale bacon prices has been effectively reflected in the retail shops, and to ensure that it is. Inquiries of this kind are to be carried through and extended by the Commission. This is a programme for intensifying the activities of the Price Commission in the immediate future.

I have made these points because they are put to us in the discussions which we have with the TUC and the CBI, and it is right that they should be made in public. But there are some in the talks who demand that every price in every shop up and down the land should be controlled. I see nods of agreement. That is an impossible proposition. It cannot be. But the Government will support a further campaign to give the housewife information about what she should expect to be paying, especially in the sector of foodstuffs.

Mr. Peter Shore (Stepney)

This is all very interesting, but will the right hon. Gentleman say whether he expects, in the year ahead, that the rate of inflation, as a result of all these checks, will be held or will be less than the rate at which it is now running, which is 9 per cent. or more? Secondly, as the right hon. Gentleman is covering everything except the most important problem that the nation is facing, will he say what he intends to do about our catastrophic balance-of-payments problem?

The Prime Minister

The right hon. Gentleman well knows that forecasts of that kind are not made publicly. But concerning the balance of payments, if the Labour Party is supporting a policy of expanding the economy, it must be prepared to accept the consequences of the import of raw materials and, in many cases, plant necessary for the expansion of the economy until the exports themselves meet the imports. Export expansion has been very considerable. We are export led. At the same time we must expect that the replacement of stocks and the import of materials and plant for an expansion of this size must be borne on the balance of payments.

Mr. Skinner

Now that we have got to the most important matter, namely the economic factors and the economy generally, would the Prime Minister give me the approximate date of the autumn Budget so that I can put it in my diary, and be ready for it?

The Prime Minister

We have agreed on the objectives which we will work for to sustain economic growth, check the rate of inflation and help the low-paid and pensioners. Any further steps we can take will depend crucially on the nature of the agreement which we can achieve.

The CBI and the TUC naturally press the interests of their members but all of us in the talks have a larger responsibility to the people of this country to recognise that our common interests are greater than our differences. We must ensure that the differences do not reach the point at which the impetus of national progress is hindered or disrupted which would be in the interests of no one trade unionists, employers or any other citizens. The responsibility of the Government goes wider than prices and wages. Throughout we have sought to ensure that the weak are protected and that the most effective use is made of the money available for that purpose.

Throughout we have sought to ensure that our overseas policies are such that we can trade widely and exercise influence effectively in the circumstances of the latter half of the 20th century. Above all, we have recognised that we cannot ask industry to be positive and farsighted in its investment decisions unless the Government are also positive and farsighted in providing the services which will be required in 10 or 15 years time.

I look at the Opposition's motion and consider the situation in which we now have steady economic expansion which can be sustained and is export led. I see consumer demand levelling out and investment increasing, unemployment substantially decreasing and regional regeneration taking place as a result of the policies we are pursuing; and when I see that stage 1 and stage 2 have been successfully and peacefully implemented, and that there has been a major reduction in working days lost in industry, I recognise that we have an opportunity to move into stage 3, to deal with anomalies in an orderly fashion and to secure an improvement in the real standard of living.

I take into account in this process that those groups in the community most needing protection can receive it. These achievements require above all a continued expansion from which everyone can benefit. We need to make better use of our resources, especially during the coming 18 months, before the investment which is carried through can be operative. This requires us not merely to overcome any suggestion that because difficulties may arise in certain sectors of industry expansion should be brought to a halt, but renewed ingenuity in dealing with these problems, whether on the shop floor or elsewhere, and whether this requires the work of management or of unions.

I believe that many union leaders today want to see a new approach to these matters. They want a better relationship on the shop floor, and it is for management to respond to this. We can discuss this framework not only among ourselves in this House but in the European context of what the future organisation of industry will be from the point of view of worker participation. Within it we can secure better human relationships and the breaking down of class barriers. We all know plants where this has already been done. We also know how much more progress still requires to be made. This, again, cannot be done by one side alone. This is the way to achieve a just and fair society—not an equal society, which is never attainable but a just and fair one, because of the work of the partners in industry.

Mr. Tam Dalyell (West Lothian)

Some hon. Members will recall that during Question Time the Secretary of State for Scotland said that if the European Trade Mark Centre were to come to the United Kingdom it would be in London. This is more important than the European Patent Office. Why does it have to be in London? Are all European agencies to be in London?

The Prime Minister

That matter can be discussed on another occasion.

What are the Opposition's proposals to deal with these problems, or to produce a fairer and more just society? Their proposals are the blight of further nationalisation or the abandonment of other things for which they stood when in office. We have extended the system of fair rents and given help to those who could not afford them. Fair rents was a principle introduced by the right hon. Gentleman and his friends, but they have now run away from it. We have negotiated Britain's entry into the European Economic Community. This was a policy of the right hon. Gentleman and his colleagues, but now they have run away from it. We are going ahead with providing for Britain massive investment to meet the needs of the future. These massive schemes are projects from which the right hon. Gentleman and his colleagues have continually run away. They cannot agree on any realistic policies directed to the needs of modern Britain, despite their working committees and 70,000 words, we are now told, or perhaps because of the 70,000 words.

They are led by a man who, unlike the famous Duke, does not even lead from behind but leads by abstaining. This is the party and that is the man who have introduced a motion of no confidence in Her Majesty's Government. I ask the House decisively to reject it.

5.47 p.m.

Miss Betty Boothroyd (West Bromwich)

It is never very easy to make a maiden speech in this House, but it can be particularly difficult to follow a Prime Minister. But I hope that the House will be tolerant with me this afternoon.

I speak today as the Member for West Bromwich, well aware that my predecessor, Maurice Foley, was a respected Member of this House and a Minister with special responsibility for immigration and race relations in a former Government, I well know the stand he took on this issue, both in the constituency and nationally. He is a man intolerant of injustice in all its forms and with the ability to apply in a practical manner his sense of decency and fair play.

As a first-hand witness, I recall his integrity in dealing with those who seek to excite the most violent and irrational emotions because they believe that to be anti-colour and to be anti-immigrant is to court popularity. Today, Maurice Foley is an international civil servant, responsible for associating the developing world with the developed world of Western Europe, a job that he is particularly well-experienced and well-equipped to perform.

My roots are working class and I have earned my living since the age of 17. Therefore, I claim to be able at any rate to speak for ordinary working people. This, reinforced by recent support of the electorate, might, I hope, help to balance in some way my lack of parliamentary experience. But I am proud to be the Member for West Bromwich, sent here in the main by people who earn their living in industry—in foundries, rolling mills, in factories, making components for motor cars and aircraft and a variety of engineering products—industries which secured for Britain her formal industrial power and which today ensure her economic survival.

West Bromwich's Victorian town hall has an elaborate ceiling cast by the iron masters of old and the borough has a prizewinning brass band. Having been brought up in Yorkshire's West Riding I need no converting to industrial people. They are my kind of folk.

I am sure that politicians and parties must give a lead, but they must also turn a sensitive ear to the views of constituents. I hope that it will interest the House if I mention just two major issues which concern my constituents. The first without doubt is that of inflation. The second is a strong feeling they have about injustice in our national life today.

Earlier today there was a heated argument about land and homes. In West Bromwich in June 1970 the price of a plot of land for an average house was £1,500. Today it is double that. Building society figures show that the average price of a new house in the Midlands was £4,800 in June 1970. Today it is £8,200. In June 1970 monthly mortgage payments were £34. Today they are nearly twice that figure. A family needs a large income to meet these demands.

I turn, secondly, to the justifiable complaints of my constituents about the rocketing price of food which has worn out the elasticity of their wage packets. For three weeks we monitored prices in West Bromwich. Every other day we carried out a survey of retail prices in the high street. We found that even in one week many essential items had crept up in price, some by one penny, some by more.

No wonder the cost of living was the talking point. No wonder I was constantly asked, "When will something be done about it? "One suggestion we made was that local authorities should be given powers to monitor prices locally and to tackle abuses locally. Having abandoned the Consumer Council some three years ago. I hope that the Government's new proposals for consumer centres will be given teeth and powers to protect the consumer as well as to advise the consumer.

It was no comfort to my constituents to learn that only a week after I had taken my seat in the House the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food told the House, in answer to a Question, that during the period of this Government on the latest figures available families have had to pay an extra 49p every week of food for every person in the family. This does not include essential household items. It is 49p per person, per week on food alone.

Hon. Members will recall, as I do, that nationally organised band of women known as the Housewives League. They campaigned dutifully in the late 1940s objecting because ration books were still required for essential foods. Where are the daughters of the consumer revolution now that we have rationing by the purse?

It can hardly be made more obvious to the Government that people want convincing action to protect them from rising prices. The Chancellor added to their general hardship in his April Budget, and he can now help to put that right. I was disappointed to learn today that there is to be no increase in family allowances. This matter could be put right by increasing family allowances and by granting an allowance for the first child. This is one of the fastest methods possible of getting help to those in need.

Secondly, under phase 3 the level of pay rises must be related directly to the cost of food and other essentials. This threshold method of increases would help all wage earners, those with families and those without children, and it could be extended to cover pensioners.

Thirdly, in improving the common agricultural policy the Government must ensure that major changes are made to reduce the glut of dairy produce. I know that it is not easy. The emphasis must be on the growing demand for protein foods such as beef and pigmeat. The important thing here is that the Government must take an initiative. It is not enough merely to negotiate on the proposals of other member nations. I mentioned earlier that politicians must listen, but they must also give a lead in these matters.

I turn next to pensioners. At a time of rapid inflation they, too, need rapid help. In West Bromwich we are blessed with a social services department which is second to none. We have people who give their time and their energies to clubs for the over-60s. Were it not for those men and women, many of our elderly would find loneliness a final burden in their struggle for existence. In far too many cases they do not have a life, but a struggle for existence against the odds. There was disappointment that the Budget which gave relief to surtax payers did nothing to recognise the pressing needs of the elderly. With spiralling prices and with the pound rapidly falling the October increase is already overtaken. In my family we would say in such circumstances, "It has got its coat and hat on before it is over the doorstep."

Why is it not possible for an immediate increase to be given to cushion the effects of inflation? Why is it not possible for those who produce their pension books at their regular post office to get an increase in benefit from August onwards? If it is argued that it is administratively impossible to cope with the paper work, we have only to look at previous years. In 1955 and 1964 pension increases were given within a matter of a few weeks. Surely with modern management methods and with computers it is possible to do that in 1973. Why must the pensioners wait until October?

May I finally turn, briefly, to the question of our national life. The firm impression that I carry from the West Bromwich by-election is the dissatisfaction that people feel that our society is unjust and unfair, that we live by the rule of law but that there is one law for the well off and another for those who are not so well off.

It is difficult for me to articulate their feelings, but I shall try. Allow me to put it like this: have the Government a right to be listened to in their appeal for wage restraints when we have only to look at the financial pages of the national Press to see that company profits are rapidly increasing? Have the Government the right to be listened to by families seeking homes when rents are deliberately increased and when the property speculator is elevated to the top of our society? Have the Government the right to be listened to by hard-hit families when measures to protect their interests are rejected?

The Government were not elected constantly to explain away the problems of world conditions, world prices or the actions of primary producers. They were elected to find the answers. There can be no real progress until everyone realises that we have a two-tier society and that until practical steps are taken to alleviate its injustices people everywhere will feel badly about this Government which were elected on false promises. I thank the House for listening to me so tolerantly.

6.0 p.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

Perhaps it is not out of place for a fellow Black Country member to welcome to this House the hon. Member for West Bromwich (Miss Boothroyd) on making her maiden contribution. There used to be a tradition, which I am glad to see is disappearing, that maiden speeches were non-controversial. It was an unhealthy tradition and I am glad to see that the hon. Member would have no part in it.

I am sure, however, that she will forgive me if I do not take up too closely the points that she made. Suffice to say that I understand, and perhaps I am quoting her wrongly, that she announced her return to these corridors which she has for so long decorated by saying that she had been permitted to enter the executive too. I do not know whether that is correct, but I can assure her that we should like to see her in all the executives seats, including the Front Bench.

I should like to comment on the speech of the Leader of the Opposition, notwithstanding his absence, because he gave us a most apt and convincing illustration of how we should win the last war. I do not think there was a single thing in his speech which would have been particularly out of place if uttered by some great radical leader of 50 years ago. He left me with a feeling that I was listening to the great days of radicalism in this country.

However, times have changed. In military terms the right hon. Gentleman was leading the Polish cavalry against the German tanks. He was most gallant and brave but not altogether convincing and he was not likely to win the war. I remember a former Serjeant at Arms, Brigadier General Howard, who won a great reputation for gallantry in the First World War by constantly exposing himself to fire in order to encourage his men. We could give the right hon. Gentleman a medal for gallantry. He exposed himself to fire on five or six occasion, not very convincingly, but at least he was there and showed himself.

However the war we are fighting is now different. We are not fighting the war of 1870 or even of 1970. We are faced with an entirely different situation. When Vesuvius erupted the citizens of Pompeii were probably discussing plans for a new public baths. No doubt that was a matter of great moment to them, but they were completely unconscious of the deluge of death and destruction that was about to descend upon them. That was the position today. We are facing what amounts to an eruption of Vesuvius. Price inflation all over the world in the last 18 months is something which will bring much of the Western world as we know it to an end. Attribute the blame where we may, but the Western world has been doing what mediaeval kings used to do. They used to sweat their currency—reduce its value by reducing its weight. This is what the Western world has been doing for a number of years. Led by the United States it has issued paper in return for the commodies it wanted. Now most of the rest of the world, particularly the third world, is no longer willing to accept the devalued paper of the West.

We seem to be playing the old nursery game of Slippery Anne. It was a card game in which the object of the player was to pass this unhappy card—the queen of spades or Slippery Anne—on to a neighbour. The idea was not to keep it for any longer than was necessary. The Slippery Anne in this case is the paper currency of the West. The East does not want it any more. It wants it only for what it can buy. One of the reasons for the inflation we face is that the Western currencies no longer have the purchasing power that they had vis-à-vis the raw material producing countries.

We must try to find a means of fighting not the Boer War or even the 1914–18 War but the economic war before us. Our view is that a constant rise in productivity is likely to be the right answer, but it is dangerous. It does not appeal immediately, and we must take the population with us. That is the most important factor. An attempt to say that there is no danger, which is what 1 detected from the Leader of the Opposition, and that all we have to do is to pretend that there is no danger and it will disappear, is not a productive policy, nor one that should be commended to the party that seeks to describe itself as an alternative Government.

In a speech after the Budget I recommended my right hon. Friend the Chancellor to consider the possibility of index-linked borrowing. I still believe that that strategem should appeal to him. It would put his money where his voice is. The issues of stock which were made with such éclat after the Budget have not been particularly successful in attracting funds from the public.

When Sainsburys, that eminent firm, made a public issue of shares, "only "about £500 million was put up in applications. That does not suggest that any of the banks emptied their tills to apply for Sainsbury's shares. It shows the vast amounts of short-term money sitting in London because investors do not feel sufficient confidence to invest it in the gilt-edged market or in industry. The very existence of those amounts adds fuel to the fire of lack of confidence.

Therefore, I suggest that the Governor of the Bank of England, to whom we all wish well, should look at the amount of short-term money sitting here and take steps to take some back by demanding special deposits. It is a well-known practice. It does not affect the permanent supply of money but just prevents the exaggeration due to an excess of floating money.

I could not help noticing that on the same day as the Governor went to Basle one of the largest banks in the country invested no less than £100 million in a property transaction, which had the effect of putting £100 million into circulation. It is no good our preaching to our friends and neighbours the qualities of thrift and good housekeeping if we behave in this reckless way.

When I speak of behaving recklessly, I think, too, of Rowntrees, which has managed to lose no less than £20 million in speculation in the cocoa market. It does not have to speculate in cocoa. It is the biggest consumer of cocoa in the country. I believe that beyond a peradventure of doubt it is looked upon around the market as naturally good for its engagements and as having a level judgment. That such a firm should lose that sort of money suggests complete lack of supervision and a feeling that money is becoming confetti. That is a matter well within the Bank of England's power to bring to an end. If people think that money is confetti, they will spend it like confetti and expect it to fall from the sky like snow.

There is complete woolliness on the Government's expenditure programmes. This year we had the May reductions in the Estimates, but I believe that in practice the only project which has been brought to an end this year is the new House of Commons building. I do not think that any other project has been curtailed or stopped because of the announcement by my right hon. Friend the Chancellor in May.

It has been explained honestly and honourably by the Treasury that accuracy in estimating is almost impossible. Most Departments are optimistic about their estimates, and therefore they can cut £500 million out of the expenditure Estimates without affecting the revenue side, because that amount would have proved to be under-spending at the end of the year. It is a form of sloppiness which the House should not tolerate. I see my right hon. Friend the Chief Secretary looking up, but these words will be substantiated in print all too soon. Therefore, I shall say no more about that.

I do not believe that anyone can tell us what our commitments and expenditure on the road programme are. The matter is a riddle, and none of us is in a position to answer it. Government expenditure grows imperceptibly through optimistic estimating and under-spending, and there is no limit to it. Just as Government spending cannot be activated upwards to act immediately, except on the social side, it cannot be conveniently cut, because nothing concrete seems to emerge.

It is clear that there will be a shortfall in Government expenditure, because certain industries are definitely overheating. One is the building industry, in which there are already shortages of gypsum, bricks and steel, all affecting the construction industry and all in the long run affecting the expenditures of the nationalised industries. These are known facts. We know that there will be a shortfall on current estimates, whatever they are.

Our problem is that there is becoming a separation in Britain not between employers and employees but between employees and their union leaders. Union leaders now are not always regarded as acting in the best interests—,I do not say rightly or wrongly—of those who they are supposed to look after.

In a company with which I am connected I found great difficulty in persuading employees to join the union. They show no willingness to do so. They are frightened that they will be taken out of their jobs because of disputes in which they are not remotely involved. I do not invent that. We know that this is what happens.

There are more people in Britain who get reasonable job satisfaction from what they are doing than there has ever been before. The majority of those who are employed would like to get on with their jobs. They want to be allowed to get on with them. They see a reasonable fairness in the plans which the Government are putting before them. I only hope that my right hon. and hon. Friends will remember that the people are not all engaged in sabotage. Most British people like their work and would like to be allowed to get on with it.

6.17 p.m.

Mr. Douglas Jay (Battersea, North)

The country will be extremely disappointed by the Prime Minister's speech. He announced no new measures which the Government propose to take. The Prime Minister has never explained why, if the level of prices is totally outside his control and the Government's control, he promised in 1970 that he would be able to bring prices down. We still have that question unanswered.

It is now becoming possible to check by hard experience who was right in some of the arguments which we have had during the past three years in this House about the effect on prices of joining the EEC. Some of us predicted that membership would mean a rise of approximately 50 per cent. in retail food prices, a widening trade deficit with the rest of the EEC, and an overall current balance of payments approaching £1,000 million a year. Ministers denied those suggestions.

It is now a matter of hard fact that retail food prices have risen 36 per cent. since the negotiations started, that the United Kingdom is now running a trade deficit with the rest of the EEC of nearly £80 million a month—compared with a negligible deficit three years ago—and an overall current balance of payments deficit of at least £800 million a year.

Those who said that none of those things would happen now tell us that they have nothing whatever to do with the EEC or the common agricultural policy. That is an attempt to deceive the public which will be singularly unsuccessful. We live, of course, in a temporary period, which probably will not last very much longer, of rising world prices. But in such a period any sane Government would surely do everything possible to keep prices down and not to take action which pushes up prices even further. In fact, the Government's complete surrender to all the absurdities of the common agricultural policy has been a major cause of the present unnecessarily high level of food prices.

Since the beginning of this year the Government, at the behest of Brussels and not for any sensible economic reason, have been raising food prices. The Minister of Agriculture, Fisheries and Food said on 21st February: We are raising British prices towards Community price levels over a five-year period. —[OFFICIAL REPORT, 21st February 1973; Vol. 850, c. 478.]

We heard nothing about that from the Prime Minister today. His own Minister, in the same month, whilst addressing some farmers in Norfolk, told us vividly and candidly how that will be done with butter prices. The Minister said: We start the transition with a low intervention price reflecting the low market price in Britain of £357 a ton. The full Community price is £837 a ton. We divide the difference by six to give the amount of the increase which we make on 1st April each year. I understand that so far the intervention price has gone up to £403 a ton.

The Government are using two instruments to force up food prices in that way. First, there is the imposition of a series of import taxes and levies. Secondly, there is the operation of the Intervention Board in taking food stocks off the market and denaturing them to make them unfit for human consumption.

The Government—we did not hear a word about this from the Prime Minister—have imposed in the past few years the most sweeping series of import taxes on food which has been borne by the British people for generations past. When I hear so much about food subsidies I often wonder how many hon. Members realise the extent of the food import taxes imposed by Britain in the past two years. According to the information given to me by the Minister of Agriculture, Fisheries and Food on 14th June, in answer to a Question, import taxes or levies are now being imposed on the following foods: mutton, lamb, poultry, beef, eggs, bacon, pork, fish, butter, cheese, fruit, vegetables, canned fruit, cereals, cereal products, lard and sugar. We are now threatened with a tax in the autumn on beef.

Mrs. Renée Short (Wolverhampton, North-East)

Disgusting.

Mr. Jay

Some of the taxes are extremely heavy. It is no good pretending that they are trivial. The import levy on butter is now £163 a ton. That is a tax of approximately 40 per cent. at existing world prices. That tax has already virtually shut out all Australian butter from the British market. The levy on cheese is £220 a ton. That has shut out all Canadian cheese. It is no wonder that prices are rising in these circumstances.

But price raising through import taxes is not enough for the Government to satisfy the Brussels authorities. They have also set up the Intervention Board, whose sole purpose is to keep food prices up by buying up stocks and by paying traders to withhold stocks from the market … and by "denaturing incentives".

I am quoting from Class V, Vote 12 of the Government's Revised Estimates which were issued on 2nd July. These Estimates show that in the present financial year the Intervention Board proposes to spend £55 million, not in bringing food prices down but in keeping them up. According to the Estimates the board this year is to spend £44 million gross and £15 million net on intervention buying so as to keep prices up. It will spend £151 million gross on intervention buying of cereals. It will spend £71 million on skimmed milk powder and £17 million on butter. Perhaps the Government will explain why it is necessary to spend £17 million on taking butter off the market at the present price and, incidentally, what is going to happen to the butter.

On top of this, the board is to spend another £40 million on payments to private storers for withholding stocks from the market —this is stated in the Revised Estimates, on page 2—and on "denaturing incentives". About £4½ million is to be paid to traders to withhold from the market stocks of butter, sugar, meat and cereals. Most remarkable of all, an additional £22 million is to be spent on denaturing incentives—in plainer English, paying people to make food, presumably mainly cereals, unfit for human consumption.

At Question Time, periodically, the Minister of State feebly attempts to pretend that the Government are only denaturing wheat in order to produce more feedingstuffs for animals. As he knows, that is humbug, because animals, strangely enough, are perfectly content to eat undenatured wheat. The sole purpose is to keep up the price of wheat for home consumption. The Minister has now made arrangements even for beef to be "sold into intervention", as he calls it, although I presume that he has not yet actually done so.

While, therefore, the Government talk about subsidies and claim that the rise in food prices is outside their control, they are both imposing this sweeping range of import taxes on food and spending over £50 million a year through the Intervention Board solely to keep food prices up. There are, therefore, two simple ways to bring food prices down—and the Prime Minister asked today what the Opposition would do. They can be brought down any day of the week, literally at a stroke, by cancelling the whole range of import food taxes now in force and abolishing the Intervention Board and its whole operations.

If there are any people left who still pretend that the common agricultural policy has not already pushed up food prices here, they have only to look at the prices of some key commodities—sugar, for instance. The United Kingdom intervention price is already well above the Commonwealth Sugar Agreement price. For butter, the intervention price is already above the world price. Of course, if one stays out of the EEC altogether, as the Russians have done, one can buy butter for 8p a pound instead of paying, as we do, about 25p a pound. And, significantly, one of the few major foodstuffs which has not risen in price at all in the last three years—tea—is not affected by the CAP.

The most serious blow to this country's future is that not merely is the CAP forcing food prices up now, but that, if we remain bound by it, it will prevent them from coming down when world prices fall—indeed, it will force them up still further. For instance, the import levy on butter is now £163 a ton, or about 40 per cent. of the world price. Under the present arrangements in four years' time it is due to rise to £601 a ton—about 150 per cent. of the present world price. What are butter prices likely to be when that happens?

One might have supposed that if there were any shred of reality in the Government's claim not to be responsible for the rise in food prices, the main aim of their policy this year would have been the drastic reform of the CAP. We were told again and again that one of the main purposes of joining this curious organisation was to reform it from within. Indeed, the Prime Minister's White Paper of July 1971 said: We shall be joining at a moment when we shall be able to influence the process of development. We shall have full opportunity to make our views heard and our influence felt in the councils of the Community. What is happening?

This year, with the GATT negotiations due to open in September, the Government have had an ideal opportunity to demand drastic reform of the CAP. The major interest of the United States coincides with ours, as does that of Canada, Australia and New Zealand, in requiring freer international trade in grain and other foodstuffs. We could have argued with massive international support. But the Government have agreed in advance, without even informing, let alone consulting, the British Parliament, to a Community document, dictated, of course, by the French, which says that the "principles and mechanisms "of the CAP should not he called into question and are therefore in no way a matter for negotiation. So it is laid down in black and white that all the monstrosities of the CAP are sacrosanct and that France is to continue, apparently, indefinitely, to be allowed to live on a dole from this country. This surrender, in the prospective GATT negotiations, of such a priceless opportunity, which has hardly been revealed to the House at all, is an act of extraordinary folly by the Government.

The Prime Minster told us the other day that a complete review of the whole CAP is going on within the Community itself. But what is the good of holding an internal review in the Community, where we are in a hopeless minority on this issue, when we throw away the one real chance of getting any substantial reform adopted in practice in international negotiations? The exclusion of the CAP principles and mechanisms from the GATT negotiations is one of the worst surrenders of British interests made by any British Government for a very long time. It means, if the Government have their way, the deliberate and completely unnecessary adoption of a rigid dear-food system indefinitely, for this country. That in itself together, with the completely negative speech of the Prime Minister, would fully justify this House in censuring the Government's food policy today.

6.33 p.m.

Mr. Christopher Tugendhat (Cities of London and Westminster)

It is always a pleasure to speak following the right hon. Member for Battersea, North (Mr. Jay). Some speeches of right hon. Members on the Opposition benches have not always been marked by consistency, but not even his worst enemy would accuse the right hon. Gentleman of inconsistency in this subject. I cannot think of any Member from an urban constituency who has devoted more time to the study of food and agricultural matters than he has, albeit that I do not find myself always in agreement with his conclusions. Perhaps it is a pity that the right hon. Member for Newcastle-upon-Tyne, Central (Mr. Edward Short) did not talk to the right hon. Gentleman before going on the radio earlier today.

Mr. Edward Short

My right hon. Friend the Member for Battersea, North (Mr. Jay) has proved exactly what I said—that levies imposed in the last two years are denying us access to cheap food from many parts of the world.

Tugendhat

Whether the right hon. Member for Battersea, North would also have agreed with the points made by the right hon. Member for Newcastle-upon-Tyne, Central about poultry in the United States and pigmeat in Poland I do not know, especially in view of the export restrictions recently imposed by the United States.

We face a difficult outlook. The right hon. Member for Battersea, North referred to the terms of trade. I agree that the rate of increase in world prices will probably not go on rising at anything like the rate of last year. It would be contrary to all experience of markets were it to do so. But he may well agree with me that, at the most optimistic, it is likely to be some time before the relative level of import prices to export prices returns to anything like the sort of level we were accustomed to in the late 1960s and early 1970s.

At the same time we find a difficult situation with regard to interest rates. There has been news of rising interest rates in the United States and on the Continent. It seems only a matter of time before interest rates have to rise here. If there is a disaster with the harvest, or any natural upset of that kind, the terms of trade may not improve to the extent that I hope they will. That, too, will add to the Government's problems.

In this context the Government must do more than simply try to reduce the rate of inflation as much as possible. They must also try to protect people against its impact. Rapid inflation is always harmful to society and always unfair in its effects. But even when inflation is proceeding more rapidly than we should like there is a great deal a Government can do to mitigate its worst effects and to protect people against its more disastrous consequences.

I believe that threshold agreements provide considerable hope here. I was most encouraged by what the Prime Minister had to say about the Government's attitude towards such agreements. The trade union movement—at least, a great part of it—is overwhelmingly concerned to secure rising living standards for its members. It is aware of the absurdity of securing large percentage increases if these are whittled away within a few months of their implementation. It is quite understandable that at a time of rapid inflation trade union leaders should fear that their gains will be quickly diminished and should therefore go for much larger increases than can be justified by circumstances ruling at the moment of negotiation. They feel that they must have something in hand to take account of the price increases to follow. Unfortunately, when they adopt this negotiating position they are contributing to inflation, since each excessive wage claim leads to a further increase in costs and thus to a further increase in prices.

If we had a workable system of threshold agreements there would be scope for trade union leaders to go for real increases in living standards, with the guarantee that if prices rose thereafter their members would be protected. In that way we should secure a much more realistic level of settlements.

Mr. J. Bruce-Gardyne (South Angus)

I am a bit bemused by what my hon. Friend said, namely, that wage increases contributed thereafter to price increases. How will that not apply to threshold agreements when the threshold is activated?

Mr. Tugendhat

My hon. Friend is trying to drive my argument rather further than I would wish to do. Clearly, any wage increase enters into a company's costs. My point, which perhaps I should have explained more fully, was that a large wage increase is likely to have a greater impact on costs than a more modest one. That is what I was trying to say, and I do not think that it is a particularly exceptionable point of view.

If, thereafter, prices rise under a threshold agreement, wages will follow. I accept the point that my hon. Friend might make—that this will have an impact on costs. I shall revert to that question later. Threshold agreements seem to provide some way out of our dilemma. If we have such agreement it is critical that we should be quite clear about the nature of the indices to which they should be linked. Ideally, they should not be linked to the cost of living index as a whole, since that includes such a wide variety of goods and services, many of which are purchased by people only once a year or at even more infrequent intervals.

The important thing is to link the threshold agreement to the essentials—food, housing and possibly fuel—rather than to the cost of living index as a whole.

Mr. Heffer

I am fascinated by the hon. Gentleman. What margin above that would he suggest? Obviously, people want to buy motor cars, they want to go on overseas holidays, and they want to buy refrigerators. As these things become available, more and more workers want to have such things. Where is the margin?

Mr. Tugendhat

I agree that more and more people want to have cars and refrigerators, and to go on foreign holidays. It is quite right that they should wish to have these things, and wholly desirable that they should receive them. The hon. Gentleman would probably agree that one of the things that people most resent is to find that the proportion of their income taken up by things which they regard as necessities is increasing rather than diminishing.

One of the signs of the improving living standards in this country since the war has been the fact that the proportion of most ordinary people's incomes spent on necessities has diminished. The amount available to spend on things that used to be regarded as luxuries has increased. When people find that trend reversed they are naturally filled with hostility and resentment. It seems to be that the type of agreement that I am advocating would have the advantage at least of holding steady the proportion of people's income spent on necessities. I share the hon. Gentleman's general objective, that more people should enjoy those things that were at one time confined to the rich. I believe that the proposal I am putting forward will enable that joint aim to be more readily attained.

Threshold agreements by themselves are not enough. It is also necessary to give direct help to women. It is a truism that it is the man who gets the wage increase and the woman who gets the price increase. When the Government produce their phase 3 proposals it is necessary for them to pay particular regard to this. My preference would be for an increase in family allowances. I agree that the family income supplement is particularly helpful for those in need, so long as they take it up.

However, what is needed now is general assistance for housewives. I am not arguing against increasing family income supplement, but the primary concern at the moment should be to help all those who have to face price increases. I would, therefore, prefer family allowances. If the Government can find another way of achieving the same objective, that would be quite acceptable to me and, I am sure, to everyone else. Failing that, family allowances seem to offer the best bet.

The Government must also remember those who are not members of trade unions. It is possible to provide direct help to specific groups, such as those in receipt of family income supplement, pensioners, and so on. It is very much harder, in the context of the Government CBI-TUC negotiations and the rest of the panoply of economic management, to provide assistance to the self-employed and those on fixed incomes. This is a section of the community that tends to be overlooked in such negotiations. I hope that in their efforts to bring about reasonable threshold agreements the Government will not overlook that section.

That brings me to subsidies. This is a controversial and emotional subject in politics and there is always a danger that the mere use of the word will lead to misunderstanding and misrepresentation. No one in his right mind would advocate across-the-board subsidies on all foods regardless of circumstances.

That would be an indiscriminate and expensive way of achieving very little, in terms of reducing the cost of living. I was encouraged by the Prime Minister's approach to selective subsidies on a limited range of foodstuffs. I am glad that in recent months the Government have moved some way towards making greater use of selective subsidies of this sort. As they move further along the road towards stage 3 they may well find that selective subsidies, to a limited extent, will have a more important role to play than in the past.

Threshold agreements have many advantages. However, there is a possibility that the indices to which they are linked will rise at a dangerously rapid rate, especially if the terms of trade do not move in the way expected by the right hon. Member for Battersea, North and myself. It is necessary for the Government to have in their power the means of putting a brake on the increase in the indices which would trigger off the threshold agreement. It is also important that the Government should have in their power the means to help and protect people who would not be helped and protected by threshold agreements.

I am sure that threshold agreements should be the centre point of the Government's policy. They would have to be backed by family allowances, or some other device of that kind. Greater use of the policy that the Government have been adopting on selective subsidies may also turn out to be appropriate.

Mr. Speaker

There are still over 20 hon. Members who wish to speak. I therefore hope that hon. Members will keep their speeches short.

6.46 p.m.

Mr. John Pardoe (Cornwall, North)

The motion speaks of having no confidence in Her Majesty's Government. On these matters I have no confidence in the Government or in the Opposition. If one is to believe the results of recent by-elections, the country has no confidence in them, either. The motion, broadly, is in two parts. The first concerns the control of the rise in food prices and the cost of other essentials and the maintenance of the value of the pound at home and abroad. The second mentions the creation of a fair and just society.

Let me deal with the second part of the motion first. Did the Leader of the Opposition expect a fair and just society to be created by a Tory Government? What did he think he got from his own Government during their six years in office? Did the Labour Government create a fair and just society? Has the right hon. Gentleman read what one can only call the tombstone of the Labour Government—the betrayal of the radical cause, "Labour and Inequality"? If he has, can he any longer believe that his Government created anything that could be described as a fair and just society?

I turn to the first part of the motion, dealing with the prices and the pound. Again, I have no confidence in either the Government or the Opposition. The Leader of the Opposition said today that the Prime Minister had won the last election on the question of prices—but was it not perhaps on the question of prices that the Labour Party lost the last election? The right hon. Gentleman went on to say, "Most hon. Members opposite are here because of the Prime Minister's pledges."But it is just as easy to say that most of them are here because of the pledges which he, the Leader of the Opposition, when Prime Minister, broke. The right hon. Gentleman said that if the Prime Minister had meant his promises it was merely a question of a charge of incompetance; if lie did not, it was dishonesty. But plenty of promises were given in 1964 and 1966, a host of which were broken. I do not intend to detail them today.

At the last election the Conservatives made ludicrous promises on prices. They are set out in the campaign guide in the Conservative manifesto, "A Better Tomorrow", and in the Prime Minister's speeches made before the last election. But votes were not cast only on the basis of Tory promises. They were also withheld from the Labour Party because of its record on prices and its lack of policies for putting them right.

The record on prices for a long time-10 years or more—is nothing to write home about. A new house, which at the 1964 election cost on average £3,500, cost £5,000 at the 1970 election and would now cost rather more than £9,500. In other words, under the Labour Government, the cost increased by 441 per cent. and under the Conservative Government it has increased by nearly 100 per cent. on current figures and by 86–6 per cent. on the figures for the first quarter of the year.

Council house rents, after rebates, averaged £1.35 in October 1964, £2.27 in June 1970 and £3.05 at the end of last year, which is the latest period for which figures are available. Under the Labour Government the increase in council rents was 68.1 per cent.—a disastrous record in six years. The 34.4 per cent. increase under the Conservative Government to last October is bad enough, but is better on a pro rata basis.

Tory promises on prices have been broken. What we need to know is how some of them came to be made. Page 16 of the Conservative Party manifesto deals with the question of food and farming. There is a short paragraph on prices, which states: The resultant small increases in food prices"— that is, as a result of the change in agricultural policies— will amount to just over a penny in the pound per year on the cost of living for three years—a small increase in comparison with the five shillings in the pound rise of the last six years". It mentioned the rise in food prices, but it is incredible that it did not mention the likelihood that the cheap world food markets from which we had derived our food for many years—almost centuries—were likely to come to an end. It was because we in the Liberal Party were certain that they would come to an end that we became interested at an early stage in Britain's joining the Common Market. We knew that the cheap food markets would end sooner or later. The question that must be asked of any British Government is, "What did the Government do to expand home production to take care of the situation?" Both Labour and Conservative Governments paid farmers less to produce more.

Page 14 of the Conservative Party manifesto says this about the nationalised industries: We will progressively reduce the involvement of the State in the nationalised industries … so as to improve their competitiveness. I take that to imply that the Government would not involve themselves too much in the pricing policies of the nationalised industries. Yet they said at the same time that they would, by taking direct action, keep down the price of nationalised industries' output and services. How could they do that without greater involvement? How could they do it without a subsidy?

On house prices the manifesto said: Our policies will help to keep down house prices". How did the Government expect that to be done? How will the Government's attempt to keep down mortgage interest rates reduce the price of houses? It can only increase it. How will the subsidy to building societies—which, after all, is a subsidy to owner-occupiers buying their houses—bring down the price of houses? It can only increase it. There is a series of confusions, contortions and contradictions in the promises that have been made and the present policies.

The matters lying behind the motion and the problems of the £ sterling and prices are fundamental questions about the economy. Is the economy expanding too fast? My answer is a firm "No". The pace of expansion of the economy has been moderating even since before the Budget. It was a cautious Budget. I said that it was slightly deflationary, and the downturn in consumer expenditure has shown that to be true.

Is there overheating? There is a danger of bottlenecks, but no positive conclusions can be deduced from unfilled vacancies. The contradiction between unfilled vacancies and unemployment in the regions is an indication only of the poverty of training programmes during the last 10–15 years. On the pace of economic expansion, I say to the Government, "Keep going."

There is the problem of prestige and public expenditure. More than a decade ago the Liberal Party produced an outline of Liberal economic policy headed "Growth not Grandeur". I want growth, but I do not want prestige investment.

Alas, we have had far too much. It is with us now with Maplin, and goodness knows how much more money will be swallowed up by Concorde and similar projects.

What are we to do about the sinking pound? There is no remedy to be found in the fixed exchange rate. I hope that the siren voice of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), in his recent intervention, will not be heeded. Even with our considerable resources, we cannot conceivably protect a fixed exchange rate in the present speculative climate of the international currency markets. To do so would run down our reserves unnecessarily and foolishly.

I have always believed in a managed float. I am one of the founding fathers of the floating pound, having fought three elections on that policy. I believed that the crawling peg was the means of managing the float. There is a case for the Bank's giving selective and limited help to the pound, but I would not advise hanging on at the expense of the reserves. That would put enormous sums of money into the pockets of the speculators.

The Chancellor of the Exchequer said recently that he thought the pound was undervalued. In a floating situation, what is an undervalued currency? It is a nonsensical phrase. To ask whether the pound is undervalued or overvalued is to ask a nonsensical question. The pound is worth what people in the international currency markets will pay for it—no more and no less—exactly what they will pay today, not yesterday and not tomorrow.

If the Chancellor of the Exchequer meant that there is little relationship between the sinking of the pound and internal inflation, I accept that. America, for instance, has had a lower rate of inflation than we have, but its currency is down more than ours. The Swiss have had a higher rate of inflation, but their currency is up more than ours. That state of affairs is the opposite of what most hon. Members would expect.

What has happened to currencies? If we take March 1971 as 100 and use the Maxwell Stamp currency index, the pound is now 88 against a weighted average of 14 principal currencies, but against the Deutschemark the pound is now 67. It has lost one-third of its value against the Deutschemark in two years. Far from bemoaning this fact we should be glad that it makes us hugely competitive. We shall make a killing in the European markets very shortly. America is even more competitive in these markets. Its currency is down, on the weighted average, to 83 compared with our fall to 88 since March 1971. One consequence of this is that the Germans and the French will shortly be in trouble. They will not be able to sell their exports. Europe will find it difficult to sell to America. If these trends continue they will mean the death of Concorde and the whole European aero-industry.

The Belgians have been offered two aircraft—the French Mercure airliner and the Boering 737. For the same price they can get one Mercure or two Boeings. It will need a lot of political pressure from President Pompidou to persuade the Belgian Government that one Mercure is a good bargain against two Boeings. An interesting piece of news published recently in "Fortune" is that for less than the price we and the French have paid for developing Concorde we could have bought a controlling interest in the whole of the American aircraft industry. That would have been a fairly cheap investment in American aero-industry know-how.

What are we to do about prices? I agree with the hon. Member for Cities of London and Westminster (Mr. Tugendhat) that first we have to separate protection from attempts to cure the problem. We have to protect all wage earners, and particularly the lower-paid, against those prices which cannot be controlled and to admit those prices which cannot be controlled openly and honestly.

I was interested in the Prime Minister's proposals for a threshold agreement and also in the gloss which the hon. Member for Cities of London and Westminster gave to them. He will not be unmindful of the fact that I have made three speeches in economic debates advocating precisely the same policy, the first being on 5th March—

Mr. Kenneth Lewis (Rutland and Stamford)

Does not the hon. Gentleman agree that, as the Liberal Party and its representatives back almost everything, they can always say they have backed a particular policy even though it is the opposite of the policy they advocated?

Mr. Pardoe

The hon. Gentleman should not claim that he can back everything. If he were to read the promises made in this dirty piece of paper, the Tory manifesto, and his own election address he would realise that he put his name to a list of promises that has now been torn to shreds. He should not throw that taunt at the Liberal Party. Of course it is not true of us, but whether or not a statement made in this House is true is a side issue.

I hope that the Government proposal for a threshold agreement will be limited primarily to food prices. I take the point made by the hon. Member for Liverpool, Walton (Mr. Heifer) about people being able to buy cars, but we should not protect people against rises in the cost of colour television sets and motor cars. What we have to protect them against is the rise in the cost of imported foodstuffs. Rents should be dealt with in an entirely different way.

We should discriminate positively in favour of the lower-paid by calculating the effect of rising food prices over the last six months on the average industrial wage earner with a family and paying him an equivalent amount in a flat rate payment right across the board on the threshold agreement. That would help the lower-paid as opposed to the better-off. It is a far preferable system to subsidies. Until we have an answer from the Labour Party telling us how much the subsidy programme would cost in terms of an increase in income tax alone, we cannot take seriously the advocacy of subsidies by the Labour Front Bench. The second protection that is necessary is a minimum earnings guarantee, in line with the Private Member's Bill that I introduced two or three weeks ago.

By linking pensions with average industrial earnings and, over five or six years, bunging up the pension for a married couple to the level of half the average industrial earnings, we should be able to protect the old.

Families have had it tough. This has been a bachelors' Government with a vengeance, and it has produced bachelors' Budgets. There has been precious little help for families. Family allowances would be the best short-term answer, as they were at the last election, when they were promised. They are not the best long-term answer. That will come through credit income tax, about which we shall know more when the Select Committee report is published tomorrow. Rents should be dealt with primarily through the medium of credit income tax. I will say no more on that in case I leak something that should not be leaked.

On incomes policy the Prime Minister waxes eloquently, with the view that no modern Government could run an economy without intervention in incomes. I remind the House that three years ago the Conservatives took a fundamentally different view.

Mr. Kenneth Lewis

Not I.

Mr. Pardoe

The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) advocates everything, so he is always right. He wants it both ways.

Mr. Kenneth Lewis

I merely wish to indicate that the Liberal Party is not the only party that has taken certain lines on certain issues. I did not oppose Labour's incomes policy. I have always advocated an incomes policy.

Mr. Pardoe

I am glad to hear that. I have sat through most debates on an incomes policy since 1966 and I have made many speeches on the subject. I have heard speeches from the Labour Party on prices and incomes and I have heard speeches on the subject from the Conservative Government. The only trouble is that they have stopped sides. I remind the hon. Gentleman that on page 11 of the Tory manifesto his party said that Labour's compulsory wage control was a failure and we will not repeat it … We reject the detailed intervention of Socialism which usurps the functions of management and seeks to dictate prices and earnings in industry. I hope that the hon. Member for Rutland and Stamford will be able to show me a speech in which he denied that he accepted that policy.

I believe that there has to be statutory incomes intervention. Voluntary incomes intervention is a non-starter and cannot possibly work. The way to do this is not by imprisoning or fining trade union leaders for doing their job; it is by taxing those who obtain excessive wage increases. We should fix a ceiling on what- ever the economy can support. Firms that increase their average earnings per employee by more than that ceiling should have a selective tax imposed upon them. The best way to operate the system would be through National Insurance contributions. I shall not enter into an argument with the hon. Member for the Cities of London and Westminster on the question whether the Liberal Party or the Economist invented this scheme. I pay tribute to Mr. Norman Macrae if he thought up this idea in his bath. Whoever thought it up, it seems to me to be the best way of implementing Government intervention in terms of income.

I am glad to hear that the Prime Minister is now a paid-up convert to the view that such intervention is essential in the running of any modern economy.

7.0 p.m.

Mr. J. Selwyn Gummer (Lewisham, West)

In some ways it must be pleasant to be the Liberal Party's spokesman on economics because, at the end of it all, one does not have to add up the bill when one has chosen all the various bits that have taken one's fancy from everyone else's policy. In that way it is easy to be consistent. The seated interventions made by the hon. Member for Liverpool, Walton (Mr. Heller) were quite correct. In other words, the Liberal Party does not have to pick up the tab, nor is it likely to have to do so, and therefore it can present the most attractive policies. This is what happens when somebody else is presented with the bill and has to pay it.

The speech made by the right hon. Gentleman the Leader of the Opposition ended on a promising note. He concluded by saying that he was concerned to share the wealth of the nation and to create one nation. That is a statement that can be shared even by the economic spokesman for the Liberal Party, and we can surely all agree on that.

I should like to look at the major aim which I am sure we all want to achieve. I refer to the creation of wealth and the sharing of it in such a way that the people of our nation—whatever they may do, whatever attitudes they may have, or whatever jobs they may do—will share increasingly in that wealth. This means obtaining the wealth in the first place.

At no point in his speech did the Leader of the Opposition give any indication of what new methods he had evolved after six years during which the major failure of his Government was that they did not create the wealth to help those who are in need as well as those who are the wage earners. It is true to say that under the Labour Government the poor got poorer. That did not happen because the right hon. Gentleman, the then Prime Minister, was wicked or because he wanted to remove money from them, but because he had not got the money and the wealth was not being created. Therefore, the Labour Government was unable to carry out the undoubtedly good intentions of the right hon. Gentleman. When we are concerned with the creation of wealth, growth must come first. It is this dedication to growth which seems to me to be the hallmark of the Government's policy, which I support.

The hon. Member for West Bromwich (Miss Boothroyd) made a maiden speech which was controversial, and I should like to refer to it. She asked whether a Government had the right to ask for wage restraint when profits rise. The answer to that has to be "Yes". Unless profits rise and unless those profits are reinvested and used for the expansion of industry, there can be no expansion of our wealth. Therefore, it seems to me to be a most dishonest argument by the Leader of the Opposition to suggest that there is something wicked in profits per se. Profits are essential for the health of an economy and Labour Members are right to investigate the matter, to argue about how those profits are to be used and whether they are to be used for the expansion of industry or are in fact used in an unsatisfactory way.

Mr. Michael Meacher (Oldham, West)

If the present Government are so effective in generating wealth to decrease poverty, why has the policy of the present Government led to an increase of a third of a million in the number of the poor in the last three years, and why are the poor continuing to get poorer under the Tories?

Mr. Gummer

Those figures are just not true. All we have done is to increase supplementary benefit rates. The hon. Member for Oldham, West (Mr. Meacher) often puts forward that argument, and it is easily destroyed. No doubt the hon. Gentleman by repeating those false figures often enough hopes that the public will come to believe them. But the public will not believe them because those who are hardest hit by rising prices have been helped much more by the present Government than they were by the Labour Government. I hope that such people will be further helped, and I have one or two suggestions about what can be done to give help to those who are most in need.

There is no point in continuing the age-old argument in which one side says "Yah-boo" to profits instead of attempting to isolate the real issue. That issue is whether profits once created are used in a way that is beneficial to society or whether they are not.

I was interested to hear the Leader of the Opposition's remarks about wages. He argued that we needed a policy which accepted that wages were not a material part of the increase in prices. What he was saying was that if we had not restricted wages, in some mysterious way prices would have risen less fast. In fact, he was asking us to do something which would result not in less price increases but in more price increases.

It is surely dishonest to suggest that we can go for a prices and incomes policy in which prices are restrained and wages are not. The right hon. Gentleman refuses to face that basic issue. It is difficult for the right hon. Gentleman because he has given his word that there will be no restriction on wage increases, but he cannot explain how one can restrain prices without restraining wages. All one would do would be to increase the present rise in the cost of living, which is the result of many causes and which would cause the sort of wage-push inflation that we experienced in the dying days of the Labour Government in their attempt to win the election.

Then we heard the fascinating suggestion that in some way or other the European Economic Community was a subject which could be left out of any discussion of the means of getting more wealth. The fact is that all over the country companies have been expanding precisely because of the opportunities which our membership of the Community has created. A company with which I am connected has for the first time set up a major export department which will make a great deal of difference to the employment prospects in a part of Yorkshire where employment is not as good as it ought to be and which will increase the wages of the very large number of people whom we employ. The reason is that for the first time we are able to get into markets which were closed to us before Britain's entry.

It would be wrong to discuss these matters without realising that one of the reasons for having confidence in this Government is that they had the honesty and integrity to stand up for what they believed in and did not turn their backs upon the possibility of Britain becoming a member of the European Community. It was one of the most progressive stands that could have been taken by any Government and it was one which would have been taken by a Labour Government if right hon. and hon. Gentlemen opposite had not at the last moment had to step back as a result of the pressure from those who really call the tune in that party.

If we create the wealth we must be concerned about how we share that wealth. I thought that it was unfair of the hon. Member for West Bromwich to suggest that nothing had been done for pensioners. The facts are totally against the hon. Lady. Pensioners have been helped more in real terms than ever before and, with the increase which is to come in October, they will be cushioned in a way that has never happened to old people before.

If we are to continue along those lines we have to look much more carefully at the ways in which pensioners are helped directly in terms of means-tested benefits. The hon. Member for Oldham, West has a point when he says repeatedly that we have too many means-tested arrangements. I am all in favour of providing for those who need help and not for those who do not need it. But for many pensioners and others seeking help the complicated arrangements that we have make matters extremely difficult. I hope that we shall not be backward when we introduce some sort of negative income tax, if that is the intention, in trying to bring into the system as many of the benefits as possible as are now available through means-tested arrangements.

The Leader of the Opposition dealt at length with rents. But how wrong it is to discuss a policy of helping those who need help by emphasising the increases in rents for those who can afford them but not emphasising the cuts in rents for the many hundreds of people in my constituency who are now better off because of the rent rebate scheme and the additional allowances made by this Government There was a tremendous fuss in my constituency when the local labour council, at the ratepayers' expense, spread alarm and despondency by saying that under this Government rents would be tripled and that all sorts of outrageous things were likely to happen. Since the Government's proposals came into force, so many people have benefited from them that the Labour Party cannot even get its own supporters out to make any attack on rents.

Mr. Skinner

Notwithstanding all that the hon. Gentleman says about these wonderful rebates and allowances, does he recollect that in the recent local government elections, not merely in his constituency but throughout the whole of England, Wales and Scotland, the same people who are supposedly benefiting from these Conservative rebates turned out and voted against his party, with the net result that the Conservative Party lost control of nearly every local council?

Mr. Gummer

If the hon. Gentleman thinks that there is any link between his views on rents and the local government election results—unsatisfactory as they were for my party—he should look at some of the Liberal successes. It does not appear to be true that hordes of people rushed out enthusiastically to vote Labour.

If the facts put forward by the Leader of the Opposition are true, if the Labour Party has a marvellous alternative policy providing the great answer to the problems of our time and if after six years of trying and failing it has now got it right, is not it surprising that at a period in the life of a Parliament when other Opposition parties have done very well, the Labour Party has failed to make any impact? I am not suggesting that the Conservatives have done very well. I am not suggesting that we are suddenly picking up enormous numbers of votes all over the country. But at a time when the Government are implementing tough and strict measures, the fact that the alternative party fails to make any impact on the electorate clearly shows that the one Government that the country does not want again is one led by the present Leader of the Opposition. I remind hon. Members that at this stage during the life of the Labour Government, the Conservative Party was winning seats that it had never won before.

Mr. Pardoe

The hon. Gentleman gives the impression that between 1972 and 1973 there was a net swing against the Government. May I remind him that despite the Government's appalling record there was in fact a net swing against the Labour Party in those areas where the figures can be compared?

Mr. Gummer

I am obliged to the hon. Member for Cornwall, North (Mr. Pardoe). I shall be more careful about my opening comments in the future. However comparisons are very difficult because of changes in the areas. In any event, it is quite clear that the people do not believe the speeches of the Leader of the Opposition.

If we are first to create wealth and then to see that it is shared properly, we must have a policy for doing it. The Opposition's motion of no confidence demands prima facie an apology. It demands at some point, in some speech, that someone should explain the Opposition's policy. I agree that the Government must defend their record and explain why they have done this, that and the other. But the Opposition must say what they would do.

I listened carefully to the Leader of the Opposition. He made a number of suggestions. For example, he suggested a crisis tax on land. That would certainly increase the price of housing, and I have no doubt that it would stop the pressure on mortgage rates. The right hon. Gentleman then referred to the greater need for public ownership. I am not sure that that has helped to improve prices in the past. It has not helped us at any point.

At no stage in his speech did the right hon. Gentleman mention any specific measure which the Opposition wished to introduce, except for his slight embarrassment in trying to get out of what turned out to have been a major faux pas on the part of the right hon. Member for Newcastle-upon-Tyne, Central (Mr. Edward Short) in a radio programme this morning. The right hon. Gentleman's speech was full of the most damaging and dangerous material of politics. By that I do not mean damaging or dangerous to the Government or to the country. I mean damaging and dangerous to politics. First we had the right hon. Gentleman's attempt to pick up any kind of prejudiced attitude and to use it. There was every kind of anti-foreigner comment which could possibly be used at every point. On every occasion that it was possible to blame or to use the foreigner as an example, the right hon. Gentleman seized the opportunity.

Then we had the right hon. Gentleman's pretence that world prices or other matters which we know to have an effect on prices in this country could be dismissed with an airy wave of the hand. I remind the House that the right hon. Gentleman was the Prime Minister who always pleaded with the House and the country to be fair and honest and to face the realities of a situation. He was totally dishonest today in putting forward views which suggested that the facts of international life could be ignored.

When the leader of the alternative government makes a speech of that kind, the least that we can expect in this House is that he should put forward a concerted alternative attitude to the situation that we face. The right hon. Gentleman offered no means of getting more wealth and no means of sharing that wealth. He explained no policy. He does not deserve votes, even from those who on occasion support him. For that reason we must show that there is only one policy for solving our problems and that it is being put into operation by this Government.

7.25 p.m.

Mr. Roger Stott (Westhoughton)

I ask the indulgence and tolerance of the House while I make my first speech in this Chamber.

I have recently been given the honour to represent my constituents in this House owing to the death of their former Member. I never had the privilege of personally knowing my predecessor, Tom Price, but I knew of him and I have been left in no doubt by the many people to whom I have spoken of the esteem, affection and genuine respect that was afforded to him by his constituents, his friends and his Parliamentary colleagues.

Tom Price represented Westhoughton for 22 years. He spoke regularly in many debates in this Chamber and served on many Committees of this House. But I think that he will be best remembered for his knowledge and expertise in the sphere of pensions and superannuation. I am sure that his presence enriched this Chamber.

My constituency has a long and proud record of Labour representation in this House, going back over half a century. Its people are endowed with an abundance of Lancashire humour and friendliness. The six townships within its boundaries were built upon the traditional industries of Lancashire—coal mining, textiles and railway workshops. Some of those industries have now sadly declined, but they have been replaced by other industries which reflect the rapid growth in technology that took place whilst Toni Price was a Member of Parliament. However, there are still many problems within the constituency which need to be tackled. The inadequate number of council houses and the very long waiting lists for this type of accommodation are matters that give rise to a great deal of concern. We have made great progress in building new schools and greater recreation facilities, but much remains to be done before we completely eradicate the terrible old buildings in which many of the children in my constituency are being taught.

It is particularly significant that the debate today is about the rapid increase in the cost of living, prices and inflation generally. Indeed, those of us who have gained electoral success recently know full well that the predominant issue throughout our campaigns was that of rising prices. The way in which the wages and salaries of my constituents and, indeed, those of many others are being remorselessly eroded by constantly rising prices was the issue, above any other, that was causing the most concern.

I took a great deal of interest in the Prime Minister's speech when he spoke about inflation. I know from personal experience, prior to entering this House, how difficult it is to balance the family budget when, on the one hand, my wife wanted more money for the weekly groceries and, on the other, my wage packet was not increasing. Indeed, many people's wage packets were actually frozen.

But if the situation is difficult for my wife and others like her, I am sure that it must be terribly difficult for those on fixed incomes and old-age pensioners when they try to live and eat properly in our "Better Tomorrow".

The scandalous rise in the prices of fresh foodstuffs recently is constantly being talked about by the women in my constituency. Indeed, only the other day one of my constituents, who happens to be an old-age pensioner, told me that she paid 15p for three small onions. No wonder she wept when she peeled them! The explanation about the rising cost of world food, however tenuously linked to the truth, left her singularly unimpressed. So there is now a substantial case for a direct increase of the old-age pension along the lines proposed by the Opposition.

Unfortunately, inflation, and the failure to deal effectively with it, does not confine itself to food alone. I was profoundly saddened by the frustrations of many young people in my constituency who want to get married but cannot afford to buy a house. It seems that the splendid ideal of having a home of one's own is now beyond the bounds of possibility for most young people, because the speculation and obscene profiteering in housing and land has been allowed to continue without any effective legislation to prevent it.

I think that my constituents and the people of this country as a whole have a right to demand positive action by the Government to stop the continued erosion of their standard of living. If the Government are really serious about providing a better tomorrow, they can start now by repealing the Housing Finance Act, abolishing prescription charges, making positive attempts to distribute the wealth of this nation evenly amongst the people, and substantially increasing the old-age pension. If these measures were adopted, I am sure that the Government's talks with the TUC about phase 3 of their prices and incomes policy would be more meaningful. If, however, the Government still stubbornly refuse to do any-think positive about the inflationary situation in which we now find ourselves, the people of this country will do it for them at the next General Election.

I thank the House for a courteous and tolerant hearing.

7.32 p.m.

Mr. Patrick McNair-Wilson (New Forest)

It is with great pleasure that I congratulate the hon. Member for Westhoughton (Mr. Stott) on an absolutely splendid maiden speech. I assure him that making a maiden speech is a bit like being sick. One feels a great deal better afterwards.

Having listened to the hon. Gentleman's moving tribute to his predecessor, Tom Price, I know that he will have brought a great deal of happiness to his many friends both in the House and in the constituency. In view of the hon. Gentleman's clear and incisive speech we look forward to hearing more from him in future.

It was a remarkable experience to listen to the Leader of the Opposition this afternoon posing to my right hon. Friend the Prime Minister the very questions that he had so singularly failed to answer when he was in power. It would not be surprising if the people of this country were completely mystified by the fact that, although the Government had changed, the problems facing this country remain almost the same.

Of course, the right hon. Gentleman made, or appeared to make, strong political points with the merest scraps of economic straws. That, again, is not surprising. When the Labour Government came into power in 1964 they issued a statement on 26th October, with which hon. Members on both sides of the House will be familiar, outlining their view of the economy as they found it.

If I may refresh hon. Members' minds, it contained these words: First, the Government took stock of the international financial situation. They have satisfied themselves that, with the facilities available, the strength of sterling can and will be maintained … We must no longer be in the position that every time we seek to increase our national production we are forced almost immediately into deficit … An attack must be made on the problem of increasing prices. Not only do they inflict hardship on those least able to bear it, but continually rising prices undermine our competitive power. No one in this House could possibly disagree with those words. Yet we know that within three years sterling was devalued by 14 per cent. and, as a result, prices began to climb dramatically.

Indeed, in the New Statesman this week, in an article on "Britain's Crisis", written by Mr. Paul Johnson, we find these words: The immediate crisis which faces us began in the summer of 1966, when the bottom fell out of Mr. Wilson's government and it abandoned in panic its policies of economic growth. There followed, inevitably, an enforced devaluation, and the beginnings of a new cycle of inflation. The point I am making is simply that no one in this House has a monopoly of wisdom in running the economy of this country. All hon. Members have had to face disappointments over the performance of their Governments because the promises that they have made on economic matters have so frequently not been fulfilled.

It would not be surprising if our people were to question whether these problems have a solution at all. I am sure that when the Leader of the Opposition talked about the pound in a man's pocket not being devalued he genuinely wanted it to be that way, just as my right hon. Friend clearly wants to get the crisis under control, but I do not believe that toying with the situation and having censure debates backwards and forwards, depending on which side of the House one is sitting, will solve the problem.

We have to ask ourselves what causes the inflationary situation with which we are confronted. There are many possible reasons. There are those who say it is labour costs, there arc those who say it is world prices, there are those who say it is Government expenditure, and there are those who talk about an extension of the money supply leading to this situation. I believe that those are merely symptoms of the situation rather than the causes. In my view, the real cause is that the international monetary structure of the world is unable to cope with the demands and desires of rising standards of life and the greater expectations of the peoples of the world.

The hon. Member for Liverpool, Walton (Mr. Heffer), in an intervention, spoke about the desire of people for better material goods, and so on, and he is right, but, as I said with reference to the Labour Party's statement in 1964 on the economic situation, there is always the problem that if we expand beyond a certain point we run into deficit and our currency begins to suffer.

The present world monetary system is like a small blanket on a bed. Someone can have the blanket over his shoulders, or over his feet, but he cannot have it over his whole body. We have reached the situation in the western world in which we cannot expand to meet the real needs of the situation without one currency or another coming under serious pressure. In this situation, Governments are reactive. They are not in a position to take the initiative. They find themselves—as this and the previous Government did—in a situation where their money buys less, and if a country is a net importer, as we are, it means that prices will increase. There is no other way in which the situation can develop.

The hon. Member for Cornwall, North (Mr. Pardoe) spoke about the rate of inflation and the lowering of the value of the United States dollar. What the hon. Gentleman failed to point out is that God made the United States fairly lucky, to the extent that it does not have to import food on the scale that we do. With the fall in the value of money, and particularly with the fall in the value of sterling, further increases in the prices of our imports are bound to take place and, as I see it, there is very little that any national Government can do about it.

Various controls could be introduced as temporary measures, such as wage and price control, with which we are familiar, threshold agreements, to which my right hon. Friend referred this afternoon, subsidies, butter tickets, and so on, but the difficulty with all these temporary measures is to know just how fat one should go. Is there a limit? Ultimately, one reaches the position in which one has to subsidise almost everything—although that argument was rejected this afternoon. What concerns me is that this is almost like giving cough drops to a person with lung cancer. They will not cure the disease, though they may bring temporary relief. I suggest that the monetary structure of the western world is in a desperately serious state and that if something is not done soon it will not only be in Britain that these hurricanes of economic problems will blow.

The Government have been skilful in floating sterling. They have at least removed the problem that confronted the previous Labour administration, who were desperately trying to protect a particular parity level against massive speculation. They spent the reserves buying back sterling that was being sold in order to keep the rate up. At least by floating sterling the Government have not had to do that. It is possible to float up and down, but the problems surrounding the United States dollar are now so great that the effect on sterling is worrying.

I shall support my hon. Friend on the Front Bench in the measures that he takes to combat the present situation. With his right hon. Friend he now has a raft of means by which he can deal with the situation as it arises, but in the long term this will not be the answer to our problem. Our problem, ultimately, is to devise a method of expanding stable credit in this country and the western world to take account of the needs of the people.

Many good things have been done by the Government in the form of trying to improve the living standards of the people, cuts in direct taxation, improvements in pensions, and so on, but they do not meet the crux of the problem, which is that what is needed is an urgent review, with our friends in other countries, of the international monetary situation.

There are meetings at Basle and elsewhere and there are discussions about special drawing rights. Although the official price of gold is 42 dollars it is changing hands at 121 dollars. This system is like driving a Model T Ford down the motorway. It is not built for the expanding needs of the world. Until those needs are met we shall go on discussing for many years the subject being debated today, because we shall not find an answer to our problem.

7.42 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

We have heard a thoughtful speech from the hon. Member for New Forest (Mr. Patrick McNair-Wilson). Indeed, if I may say so, it was one of the most thoughtful speeches that we have heard today. Unfortunately, this is not a seminar to deal with the great problem with which every industrialised country in the west has been faced since 1945, that of inflation.

There are certain anti-inflationary policies that are beyond any Government's control, but there are some policies that are not, and we are today censuring the Government because of their deliberate policies which have led to higher prices and the imposition of greater burdens on the shoulders of our people. That is the object of the debate.

I confess that I should like the House at some time to discuss in depth the whole problem of how to deal with inflation. I should love to be able to get away from the immediate argument of Government or Opposition policies and to discuss in a much deeper way the whole question whether the existing capitalist society can ever deal with inflation. My simple argument is that it cannot, but again we are not here this afternoon to deal specifically with that question.

The Prime Minister made what I thought was a rather long and dreary speech. It did not lift the House in any way. The right hon. Gentleman made a number of interesting points, but he did not enlighten us about whether the Government had positive answers to this problem. It was very interesting that the Prime Minister said that he made no promises or statements in 1970 about the pressure of world prices because they were not rising then. I can well remember that very little was said about the pressure of world prices before the freeze. We heard in the House from Minister after Minister, particularly from the Prime Minister at Question Time, that the responsibility for rising prices lay in the wage pressure of trade unionists. We heard that day in and day out. We were told that if only we could get the trade unions to moderate their demands for increases, we could reduce inflation, prices would be cut back, and the millenium would be around the corner. We were told that we would see a little light at the end of that great tunnel that seems to have existed at least since I have been a Member of the House. It seems to be an endless tunnel.

We have now had the Government's total reversal of policy. Earlier today I intervened in the debate to draw the Prime Minister's attention to the fact that during the period of the Labour Government he was a supporter of neither a voluntary nor a statutory incomes policy. I was not a supporter of a statutory incomes policy, but I was always a supporter of a voluntary incomes policy. I have never changed my position about that. I can remember the speeches that were made by Conservatives, not only in the Chamber but also in Committees, on Bill after Bill, in which they said that it would be disastrous to have a statutory incomes policy.

The present Government, overnight—as they have changed their policy on so many other things—now argue that they need a statutory incomes policy. They introduced this, and a wage freeze. But the rise in prices, particularly food prices, did not halt. Prices continued to rise.

Then we heard the argument which we are now hearing—that price rises are basically due to world prices. Previously we heard little about world prices. Now we hear only about world prices—although the right hon. Gentleman, realising that he could not continue for ever with this argument, slipped back this afternoon into saying that we should have to continue with a wages policy of some kind.

That is all very interesting, but I must draw the attention of Conservative right hon. and hon. Members to some of the statements that were made by them in the General Election campaign of 1970, because the Opposition are censuring them in relation to their policy and their promises.

The Secretary of State for the Environment said in his election address Your standard of living will fall, your job will be at risk, if we do not bring runaway prices under control. We then had the election address of the right hon. and charming Lady the Secretary of State for Education and Science, who said Pensioner; and housewives are helpless as they watch the extra shillings eaten up by price rises, many of which have yet to come. The one thing about that statement that was accurate were the price rises yet to come. They are still coming.

The Tory election manifesto said, Inflation is not only damaging to the economy, it is a major cause of social injustice, always hitting hardest at the weakest and poorest members of our community. That is absolutely true. It has been proved true by what has happened since the present Government has been in office.

The Foreign Secretary, in his election address, said Agricultural deficiency payments will be replaced by levies on imports. It will bring a small, once-for-all rise in the cost of living. But reduced Government interference in industry and an effective competition policy will help to keep other prices down. I need not continue. If I quoted the election address of practically every Conservative Members, they would probably all have the same basic argument. We have had three years of a Government who have not only failed to keep down prices to a reasonable level but have allowed them to rise, due basically to their own policies.

I promised Mr. Speaker that I would speak for only 10 or 12 minutes, because other hon. Members wish to take part in the debate, although I find that it is very inhibiting in the House these days when one has to confine oneself to 10 minutes to develop an argument. However, one must try.

Let us look at some of the policies that the Government have pursued deliberately in relation to price increases. We were told that value added tax would have no effect on prices. We all know that to be untrue. VAT has led to price increase after price increase. It is no good hon. Members now saying that there have been reductions here and reductions there. They should try to kid the people who are now paying for motor repairs, telephone bills, and just about everything else about the effect of VAT, and try to convince old-age pensioners that they are better off under the present Government.

A small group of non-political, nonsectarian people in my constituency, called the Aintree Action Group, decorate old people's homes and organise outings for them. They repair old television sets and give them to old-age pensioners. They have been doing this sort of thing for the last 10 years. On the basis of their knowledge gained from practical activity they have organised a petition in a small part of my constituency in support of a demand for a minimum pension of £10 for a single person and £16 for a married couple. From practical experience of helping old people over the years, they have learned that the only way to help them basically is to give them a better pension now. That is what the Government ought to be doing, among many other things such as dealing with rates and house prices.

The hon. Member for Westhoughton (Mr. Scott) made a marvellous maiden speech. It was first class. He said that for young married working-class couples, and for middle-class couples now, houses are totally beyond reach. Even if they could get a mortgage, they could not afford the repayments. It is also a question of acquiring the initial deposit. No doubt some people get the money, but this does not apply to the average ordinary working class person. All these matters are the responsibility of the Government. They cannot dodge their responsibility, no matter how much they try to blame the unions, first of all, then world prices, then the unions again. I hope that the House, and some of the Government supporters, will refrain from supporting the Government, because they deserve to be censured.

7.55 p.m.

Mr. Kenneth Lewis (Rutland and Stamford)

I will not take up the points made by the hon. Member for Liverpool, Walton (Mr. Heifer) except to comment on a matter at the start of his speech when he said that this was not a debate of censure on the Government for prices which have risen outside their control. The same thing was said by the Leader of the Opposition when he opened the debate. He said that the Government were not being censured for price rises outside their control.

All the price rises which, according to Opposition Members, the Government have initiated—VAT, increases in rents and school meals, prescription charges and other matters mentioned by the Leader of the Opposition—should be compared with the increases in wages which have taken place. The fact is that if, from the increases in wages and social benefits one deducted the increases in world prices, people in this country would be miles ahead in their standard of living. They remain ahead in their standard of living, even when increases in world prices are included, but the advantage is smaller, and has been getting smaller in the past few weeks. The Government have been hit by a world hurricane in this matter. They have been unfortunate. This applies to other Governments in Europe as well as to this Government. Without their anti-inflation policy, and without the Price Commission and the Pay Board, the Government and the country would have now been in a disastrous situation.

The anti-inflation policy, the Price Commission and the Pay Board have worked so effectively that even hon. Members on the Government side who were against this policy and who said it would not work, as well as Opposition Members who said it could not work and who voted against it, now admit that until a few weeks ago under phase 1 and phase 2 there has been an arrest in increases in prices and wages, and the internal inflation had been restrained.

A statutory prices and incomes policy should be operated for a certain period, and not for ever. I have never suggested that there should be a permanent statutory prices and incomes policy. We must now think in terms of how to phase this policy out. Those who criticised the introduction of a prices and incomes policy claim that in any case trouble will arise when an attempt is made to get rid of it. They say that this will mean even faster inflation. That happened when Opposition Members set aside their prices and incomes policy, although they had the support of some Government Members.

The Opposition set aside their prices and incomes policy to try to win the General Election, but they set it aside too quickly. I believe that the Price Commission and the Pay Board are here to stay, but they need not have statutory powers permanently. We must soon consider whether we phase out some of these statutory powers. I believe that we should first of all phase out the Pay Board's statutory powers. How do we do this? I am glad that my right hon. Friend the Prime Minister said that the Government are intent upon fixing a wages norm for phase 3 which is related to prices. The Pay Board would therefore look at any wage claim presented to it by employers or unions in relation to that kind of norm.

The Government must decide what the country can afford, whether the amount should be as now or something related to the cost of living plus whatever addition the Government think can be contained. This should be the Pay Board's remit. The board would then, at the request of either the unions or the employers or both, decide whether a claim should be allowed but should have no statutory right to impose anything. It should be up to the unions and the employers to decide whether to accept what the board proposes as right.

Meanwhile, the Price Commission should be retained with teeth as strong as or even stronger than it now has. The commission should not be permitted to allow any price rise over and above what the Government think is reasonable in phase 3 if the rise sought contains an element for an increase in wages or salaries above the norm. This is the way to bring restraint into any wage claim which proves to be outrageous. At the same time it will help to bring discipline into industry. Efficient companies would pay increased wages because of their increased efficiency and not from increased prices. The competent and the best industries could thus compete without regard to what they pay in wages.

Mrs. Renée Short

Does not the hon. Gentleman think that the profits made by a company should be taken into account before the Price Commission allows it to increase prices?

Mr. Kenneth Lewis

I am glad the hon. Lady mentioned that. I would allow a similar judgment on dividends. I would allow companies which could pay dividends without increasing prices to do so, because that would secure increased investment.

This should not take years to reach. The Government should do it in the next few months. World prices will not stay as high as they are now. They arc bound to go down in due course. Any Government should keep their nerve; and this one in particular will do so.

I was interested in the comments of my hon. Friend the Member for the Cities of London and Westminster (Mr. Tugendhat). People are very concerned about price rises, which hit especially hard those on fixed incomes—those on social security and those who must pay the shopping bills, namely, the women. Tomorrow the Select Committee on the Tax-Credit System is to issue a report. The system is not due to conic into operation until 1975. I believe that the family allowance system can be run into the tax-credit system. There is no reason why the Government should not increase family allowances now and eventually the family allowance could be taken over by the tax-credit system. Women would get the benefit immediately. Women do not always have their housekeeping money increased when their husbands have an increase in wages. They need further support.

If it proves necessary, the Government should not hesitate to subsidise selective foods. If the Government are thinking in terms of what should be subsidised, they should consider the Englishman's breakfast which is also sometimes his super. The food which makes up the breakfast could be subsidised.

The Prime Minister said that in phase 3 the norm would be related to the cost of living. I ask my right hon. and hon. Friends, particularly my right hon. Friend the Prime Minister, not to talk about threshold agreements. Nobody outside a university seminar or the House of Commons, and perhaps not even here, understands what a threshold agreement is. The Government will not get their policy over to the country if they talk in those terms. If wage increases are to be related to the cost of living, pension increases and social security benefits should also be related to the cost of living.

The Government must also pay serious attention to some of the arguments of my hon. Friends who do not entirely agree with me up to now. The Government must examine public expenditure. I do not want them to abandon the Maplin project, but they could phase it. They need not spend so much money so quickly. They should drop the Channel Tunnel project for the present. In 10 years' time we may need it, but we are not likely to do so for the next five years or so.

Perhaps my hon. Friend the Financial Secretary to the Treasury will tell me whether the regulator is still in operation. I would not mind 1p or more being added to the price of a packet of cigarettes to enable an increase to be made in family allowances, nor do I think that anyone else would complain.

Things which appear meritorious to some are the subject of criticisms to others. A Government are not necessarily any the better because they appear to he administratively efficient and because they are a super machine, or because they put through more and more legislation. We have had enough legislation now from this Government. We were told last Session that there would be less legislation this Session. There has not been less legislation this Session.

Mr. John Stradling Thomas (Monmouth)

There has.

Mr. Lewis

In that case, we have had too little of it this Session. We want a greater reduction next Session. People do not always appreciate that changes are for the best, even if Governments think so. There should be a pause during which the Government explain to the public the changes which they think are for the better. It is the Government's job now to put across to the country what they have done, if for no other reason than that a General Election is coming up within the next 18 months. Let us get on with persuading the people that what we have done is the right thing. Then we can hope that before we go to the country it will be apparent to all that we have done the right thing. We should also take the opportunity to explain the alternative which the Labour Party offers. The more we listen to speeches from Labour Members, the more we realise that that whatever criticisms there may be of this Government, the Labour Party has no alternative to offer.

8.10 p.m.

Dr. Edmund Marshall (Goole)

I cannot share the note of optimism which the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) expressed about the short-term nature of the inflation problem. Until he had spoken I thought there was general agreement from all sides that we were up against a problem of the utmost gravity not just in economic terms but in terms of the social injustice that problem creates.

There is agreement that we are up against a problem of universal proportions. Throughout the Western world inflation is rampant. Conservative Members have described it sensibly as both an eruption of Vesuvius and the eye of a hurricane which is catching us all. It is not surprising that all those countries which are trying to run, in some form or other, a free-reign economy should be faced with the problem of inflation. Inflation is an inevitable consequence of trying to run a free-reign economy in a modern society. Such an economy depends on the working of the profit motive. Every individual unit, whether a person or a corporate firm, has to be expected to fight for the best economic terms it can achieve.

We all know that the price of any commodity, including labour, does not reflect any intrinsic value. Even today we are learning that prices do not depend simply on the interplay of market forces. In a modern industrial society the mechanisms which determine the levels of prices are influenced to an increasing degree by the amount of political and personal pressure which goes into the process. Those pressures can work only upwards. The whole mechanism for determining prices and wages in our kind of economy is a pressure which is essentially working upwards all the time. When the housewife goes shopping she is charged fixed prices for the commodities in the shops and she is in no position to try to bargain or barter to get those prices down. The opportunities for shopping around are limited.

As my hon. Friend the Member for West Bromwich (Miss Boothroyd) pointed out, the housewife is not organised as she was in earlier days. She has no great bargaining power. A far easier method for her is to pass on the upward pressure to her husband so that he may reflect it in his bargaining for increased wages.

With the mechanisms and processes which produce wage settlements, it is easier for employers to take the line of less resistance, to absorb the increased wages into the system and to put up prices to cover them. All the pressures which have the greatest effect in our kind of economy are pressures which push prices up. Inflation is bound to happen in our kind of free-rein economy.

Nowhere is this better typified than in the system we have for selling and buying houses. People who have a house to sell go to an estate agent and on their behalf he puts it on the market at the best possible price they can achieve. In this respect human greed has produced astronomical prices for property. The system of estate agents and solicitors is geared to push up prices. As a profession the estate agents are dedicated to the creation of inflation. Their fees are worked out in terms of the selling price of the property and often the seller will simply add that likely fee to the price he intends to ask for the house. Often the buyer wants to get hold of the property quickly and is willing to take on a heavy mortgage because he knows that inflation will make it easier for him to meet the repayments in coming years.

The first year of the Government's term of office was one in which the Selsdon Man approach was dominant. There was every encouragement to give our economy a free reign. As a result the kind of inbuilt difficulties which I have described in fact increased. There was great inflation and great unemployment. There were the lame ducks which found they could not survive. There were attempts to give the public sector some kind of free reign economy. The Housing Finance Act which came soon after was an attempt to return the whole area of municipal housing to a free-reign economy. That phase of Government policy was essentially inflationary.

There was then the approach of trying to throw money at everything. Wherever there was a specific firm in difficulty or wherever it became abundantly obvious that the regions needed extra capital support, the Government suddenly rehashed their policies and started throwing in money from an apparently bottomless coffer.

While these measures may have been welcome palliatives in the short term, we all know that in the longer term they have encouraged inflation and the money supply was increased. I re-echo the words of my right hon. Friend the Leader of the Opposition in opening the debate when he said that money supply policy within the Budgets of certainly 1972 and 1973 have had an added inflationary effect.

We have had the approach of the Government to their prices and incomes policy. It has been stated in debate that the policy started with an arbitrary freeze which froze the injustices of the existing situation last November. We know that on the prices side there must have been thousands of ways in which price controls have been avoided. I will take only one example—a commodity called a shoetree. This was purchased from a department store in Leeds in the last few weeks, the price being 39p for a pair of shoetrees. This is something called a Dasco Shoe-maid and is manufactured in England by a firm, Dunkelman of London. Whereas the price a few weeks ago was 39 pence, only four months ago it was 27 pence—a 44 per cent. increase. I would not accept for a moment that this was an essential commodity in the household budget, although it may well be that it helps to increase the lifetime of a pair of shoes.

In those spheres of the economy where prices are essential the Government have not attempted to have any control in the prices and incomes policy. In housing and fresh food prices the Government have deliberately allowed their other policies to take priority. With regard to food prices we return to the central problem facing us, namely world inflation. This is something on which I re-echo the words of the hon. Member for New Forest (Mr. Patrick McNair-Wilson) when he said that there has to be urgent negotiation between Governments. Above all, we need the kind of world currency agreements which get round the problem of constantly passing on the inflationary pressures from one country to another.

8.23 p.m.

Mr. David Mitchell (Basingstoke)

In debating the problems of inflation and the Opposition's motion of "no confidence in the Government "; I want briefly to do three things—look at the current posi tion, consider what advice one gives to the Government, and examine with some cynicism the Opposition's case.

I know that it is the 960th anniversary of the baptism of King Canute, who was succeeded by his aptly named son, Harold, who appears to be still with us. The present position is one in which the cost of living has risen by 9½ per cent. in the past year, very nearly as much as the 10.3 per cent. by which it rose the year following the General Election, when we saw the consequences of Government policy during the previous period.

I accept that that is not good enough for us today. People are angry. My constituents are resentful, because they do not understand why prices have gone up. It is the duty of Members of Parliament and the Government to trust people and explain to them openly what is going on. They need to carry the public with them. There has been much talk about imported raw material and food prices. Most people recognise that if import prices have gone up it is outside the control of the British Government. Fair-minded people would not seek to blame the British Government for factors outside their control.

I have been studying the facts. It is interesting that since the year 1843 the Economist has been carrying out a regular commodity price classification. It is now based on 28 principal commodities, classified in four groups.

In the 12 months to 4th July one finds that world commodity prices for metals rose by 63 per cent., miscellaneous commodities by 82 per cent., fibres—the raw material of clothes—by 98 per cent., food by 71 per cent., and the overall imported commodities index by 75 per cent. We import about half our food and by far the largest proportion of our raw materials, as we produce very little within this island. In view of such figures, one does not wonder why the cost of living has gone up by 9½ per cent.; one says how remarkable it is that it has not risen a great deal more.

I am heartily relieved that there are signs that the rocketing increase in world prices is levelling off. It is perhaps ironic that those of us who care about the problems of the poorer countries must ruefully recognise that it is in increasing raw material prices that we see the best hope for improving the standard of living of those countries.

Let us turn to what the Government should do about the situation. We were elected on a programme to slow down the rise in the cost of living. We expected to do it, planned to do it, and intended to do it, but because of world events which we cannot control we cannot prevent the waves riding in towards us. However, we can and must compensate those who get wet. That means action to help the housewife, the pensioner, the lowest-paid, and those with children.

The House will understand and respect the convention that prevents me from expressing my views on family allowances, pensions and family income supplement. We can help the housewife by permitting wage agreements linked to the cost of living, so that for every 1 per cent. rise in the cost of living there will be a known permitted increase in wages. The housewife will then know that her husband is receiving such an increase and can ask to receive it herself. Far too many husbands are receiving increases and not passing them on. The figures for the past 12 months illustrate that—the cost of living up 9½, per cent. and wages up 13 per cent. How many housewives have had 13 per cent. more in their housekeeping during the past 12 months? If they have not, they should be putting their husbands under fairly close scrutiny to find out just how much extra he has received which he is not passing on.

The Treasury will no doubt object to having wages linked to the cost of living, saying that that fuels the fires of inflation. I realise that there is a problem, but we must set against it the fact that many trade unions conclude agreements that substantially over-kill because they suspect that the rise in the cost of living will be greater than it turns out to be. Therefore, linking wages to the cost of living would moderate wage demands.

Unfortunately, I do not have time to deal in any detail with the way in which I believe the Government should approach phase 3, but I warn the Government to be wary of general flexibility, because it means giving the biggest increases to the biggest, boldest and most bloody-minded trade union membership. That is not something we should seek to defend.

I beg my right hon. and hon. Friends on the Front Bench to realise that phases 2 and 3 can only buy time—time which the Government must use to get supply and demand in balance. Those of us who want growth, as I do, must acknowledge that it means that we must keep demand roughly in line with growth of capacity. If we do not, we shall run into bottlenecks on the labour front, in steel and in the construction industry, and delays in deliveries, which will suck in imports and put our balance of payments at increasing risk. There are far more than a few signs of that happening at present.

I now turn to the Opposition's motion. I turn to Harold. the heir to King Canute, who sat on a beach not very far from here and urged on all his housecarls. Harold defended himself from the approaching waves by a flood of commands. Harold today has given us a lengthy flood of ways in which he would command prices not to go up. We were told that he would buy cheap food from abroad. When asked where he would buy such food he was unable to produce any practical answer.

The truth is that for many years we enjoyed all the benefits of being tied to world prices at a time when world prices were very low. Prices were so low that our farmers could not conceivably produce at those prices. We had the benefit of that situation and now we will have the disadvantages. We are still committed to world prices. It is not a managed market, and it is not Common Market prices which are now affecting us. We are suffering because world prices have rocketed.

We were told about general food subsidies. They would cost approximately £2,000 million. Such a proposition is superficially attractive, but from where is the money to come? Should we print it? That means adding to inflationary pressure. What about increased taxation? That simply means reducing the incentives which at last have managed to get Britain out of stagnation and on the road to growth. That is not something which the British people would readily accept.

It has been suggested that we should freeze the Housing Finance Act, which ensures that no person shall be made to pay more than he can afford. If we are to freeze the costs of that Act we must freeze the benefits. Many of my constituents are enjoying the benefits of lower rents as a result of that Act.

A new property tax was also suggested Such a tax would be placed on top of mortgage repayments. That has not been thought through. On close examination the Opposition's proposals are no more likely to keep down the cost of food or the cost of living than Canute was successful in keeping the waves from carrying him up the beach. I only hope that the House of Harold, when it visits the trade union conferences this year, will be able to resist the temptation to urge them on, as in the past, to make inflationary wage demands.

8.33 p.m.

Mr. James Lamond (Oldham, West)

Despite the half-hearted attempts to defend the Government's record which we have heard from Government hon. Members, they must realise that inflation, as surely as night follows day, will bring about the downfall of their Government as soon as the electorate is given the opportunity to turn them down.

I base that assertion on my experience and on at least six by-elections in recent months, including the constituency represented by my hon. Friend the Member for Westhoughton (Mr. Stott), who today made an excellent maiden speech, and in particular the recent Manchester Exchange by-election. Government hon. Members cannot disregard the disastrous and humiliating result for the Tory Party at that by-election when all that it could scrape together were 683 votes. The reason for that—the Government must know the reason if they are in touch with the feelings of constituents—is the concern of the British people about rising prices, about inflation and particularly the prices of food, rents, clothes and other household goods.

The Government are so vulnerable to attack that it is difficult to select a topic to speak about. Food prices have been dealt with extremely effectively by my right hon. Friend the Member for Battersea, North (Mr. Jay). He outlined the real impact of entry into the Common Market on the cost of living and particularly the price of food.

I know that the Government have searched very long for excuses to give to the people about why they have not carried out their election promises. First, it was the so-called greedy requests of the trade union movement. Then they went a little lower. I recall one hon. Member opposite suggesting at one time that the small shopkeepers were forcing up prices. Today, we have again heard the fable that the working man is not passing on to his wife the whole of his wage increases. But whatever the excuses, perhaps we can now look at something where the Government can make a real impact—council house rents.

If the Government wished to do something quickly and effectively they could halt tomorrow the inflationary increases in council house rents. As my right hon. Friend the Leader of the Opposition said, in Oldham the report of the Rent Scrutiny Board bears out what Labour Members of Parliament have been alleging. Earlier this year we pointed out that council house rents would be doubled. In fact, in my constituency they will be 3½ times what they were in October last year.

Nothing concentrates the mind like an impending General Election, and in their search for something that could be done at a stroke, hon. Members opposite have seized on a number of things—for example, increasing the family income supplement. Some of them even want to do something about food subsidies, but most of them completely ignore the possibility of doing something about council house rents.

Why is it necessary for councils which have no deficit on their housing revenue accounts, and no need therefore to raise additional revenue from housing, to raise their rents? They do so against their own wishes and the wishes of the electorate which spoke so effectively in the recent local elections. Why is it necessary for the Government to force councils to push through further rent increases on top of those imposed in October last year?

Increases of 90p per week were forced on every tenant in my area. The local authority appealed to the Minister but he refused to see a deputation because, he said, he had nothing to discuss with it. It has behaved very responsibly, submitting proposals which it had arrived at in consultation with the local rent officer. But its proposals have been turned down and far more savage increases have been insisted upon.

The outcome of these increases in working-class budgets means that the man of the household who has to provide the money puts increasing pressure on his trade union to get further wage increases. Can the Government explain the logic? I appreciate that there are some factors outside the Government's control, but such things as council house rents are well within it, yet they do nothing about them. If they were to freeze rents, at least they would demonstrate that they were genuinely concerned about inflation and wanted to do something about it. It would be an easy step to take and would ensure that wage pressures were not so intensive as they might be otherwise, and it would also assist in keeping down the intensive agitation in many local authority areas about rent increases.

Hon. Members opposite claim that it has been difficult for local councils to get agitation started. In Oldham, which will be affected eventually by the Rent Scrutiny Board's report, because its findings must be taken into consideration by other boards in the area, a large number of tenants are still on rent strike against the 90p increase imposed last October. The newspapers in the area, including the Oldham Chronicle, which has fully reported all of this, have given the reactions of council tenant readers in the area. These have been very violent indeed.

I have no great desire to see this Government returned at the next election but if they do not wish to be annihilated and if they want to do something which will be constructive and of assistance to council tenants, they most certainly must, in the interests of one nation—the great vision of the Prime Minister—freeze rents as from tomorrow.

8.41 p.m.

Mr. Norman Lamont (Kingston-upon-Thames)

It has been suggested that Shakespeare's sonnets could not have been written and the Pyramids could not have been built except in an age of inflation. It would be nice to think that at least this age will be one of artistic flowering. Most of us have to consider the issue in a more humdrum way. There is no doubt that the issue of inflation is one that threatens the functioning not just of our own economy but of the international economy. I do not think there has been sufficient appreciation of the extent to which the precarious inflationary situation in which we now find ourselves could turn quickly into precisely the opposite situation.

I turn briefly to one subject mentioned from the Labour benches which has been held responsible for part of our present inflation, namely, the Chancellor's decision to float the pound. Obviously, part of the 15 per cent. depreciation in sterling in the fifteen months' since the Smithsonian agreement has had an effect on retail prices. Equally obviously, that 15 per cent. effect is small compared with the total effect of the world increase in community prices of between 60 per cent. and 70 per cent. in the last year alone. Only a fraction of that percentage can be ascribed to the devaluation or depreciation of the floating pound.

The other day the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) suggested that floating had become suspiciously fashionable. It was refreshing to find him in this new role of reacting against fashion. Most of us would have thought that he and his right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) who, alas, is not here, make a fairly fashionable pair in their opposition to floating. When they are joined by David Watt of the Financial Times I find it difficult to believe that all those gay blades campaigning together in favour of fixed exchange rates do not firmly indicate the way in which the tide of fashionable opinion is moving.

Leaving fashion aside, what are the arguments against floating? It is said that floating is not a painless cure—that it will not enable us to embark on unlimited expansion, ignoring the exchange rate. No one who was ever seriously in favour of floating suggested that it was a painless cure for our problems. Floating makes the need to contain inflation more pressing, not less.

It is said that the movement of the dollar and sterling in recent weeks has been out of all proportion to the movement in costs and prices. I wonder. I suspect it is wishful thinking on the part of politicians on both sides of the House. It is difficult at this time to say precisely what the rate for sterling ought to be. There have been too many changes, not just in our prices and costs but in the prices and costs of other countries and in the parities of other countries. But if sterling has moved too far down it is a wonderful opportunity for the Bank of England not just to act in the national interest in establishing a higher rate but also to make a large profit for itself. I suspect that the reason why sterling has moved down so quickly in recent weeks is simply that our interest rates have moved out of line with those of other countries.

Whereas our rates were formerly broadly comparable with those of other countries, they are now somewhat lower. I hope that the Treasury will bear in mind that our short-term interest rates, which do not affect industrial investment, do have an important effect on the exchange rate.

We should not allow ourselves to be panicked into trying to repeg the exchange rate because of the experience of the last few weeks. It is implied that the J curve effect has not been working. I am not sure that that analysis is right. The volume figures for exports have behaved exactly as one would expect with the J curve effect. It is true that officially the effect has been somewhat obscured by the movements of the values of imports through the increasing price of raw materials and imports.

Another difficulty is that when the economy is near to capacity it becomes more difficult to move resources into exports, and the advantages to be gained from further depreciation are less marked.

But these are not arguments for returning to a fixed parity. To do so would merely be to embark on the same cycle of forgoing growth and having to borrow money from abroad. In any case, no one can say precisely what the correct rate for sterling should be. The correct rate today would be wrong tomorrow, and tomorrow's rate would be wrong in six months' time. In this situation the answer is to do as the Chancellor of the Exchequer intends to do, namely, to support the pound within a band but not to commit us to a rate that would give speculators a one-way option and would be undermined in due time.

In passing, may I say that I hope that the Chancellor of the Exchequer and the Government will give the most urgent attention to the question of the reform of the international monetary system. That is not just an abstract question which is of no consequence to ordinary people. Undoubtedly the unrest about the international monetary system in recent weeks has been one of the causes, through hedging, of booming commodity prices.

I hope that in our efforts to find a solution to the problem we shall not return to the old, tired formulae of the past, trying to paper over the cracks, and of weekend meetings in Basle which do more harm than good. We should have an end to what M. Debre has called "monetary tourism". What we need is a code for living in a world of dirty floating, because there is nothing incompatible between monetary stability and floating exchange rates, provided we can lay down on precisely what terms they are to be operated, including interest rates and capital movements.

Much of the debate has inevitably centred on the question of world inflation. The facts are clear. We have experienced the biggest commodity price explosion since the Korean War. That is shown by any index at which one cares to look. Reuters commodity index, which was 100 in 1931, was 500 a year ago and is 1,000 today. The Financial Times commodity index is up 70 per cent. The commodity index of the Economist has gone up 75 per cent. in a year.

The DTI's June figures showed that the average prices paid by United Kingdom manufacturing industry for raw materials and fuel rose by 3 per cent. in a month, to bring the rise to 27 per cent. for the year. That compares, one remembers nostalgically, with a rise for the whole of the previous year of only 1 per cent. Inside this year's total the average figure for the food industry's raw materials rose by 5 per cent. in June alone, making a total rise of 31 per cent. for the year. Obviously the wholesale price index has had to follow to a lesser extent.

There is no point in denying the effects of such a situation. Of course we must try to insulate people from those effects. We must consider the question of family allowances and we must increase family income supplement. I welcome what the Prime Minister said today about threshold agreements. But there is no point in ignoring or refusing to face the reality that commodity prices have contributed very significantly to the present inflation. It is difficult to estimate precisely and mathematically what part of our inflation is due to commodity prices, but it appears from the import content of the retail price index that a guestimate might be that 50 per cent. of the present rate of inflation could be due to rising import prices. In the present situation the Price Commission has had a vital rôle to play in lowering expectations and preventing the leap-frogging increases that could have occurred. That it has succeeded is shown by the way in which retail food prices have risen substantially less than imported food prices.

This debate has been unreal, because Labour Members have not wanted to know about international factors. They have said that they are irrelevant. They do not want to know about the world outside. Perhaps that is part of their own isolationism, of their "Little England "approach; they want to turn their backs on the world. They are not interested in what happens outside this country. In a way, that is rather strange, because those parts of the world in which they are interested are usually the parts where we have the least power to influence. So one might have expected them to have been interested in this question.

Their attitude is very different from their attitude when in government, when the Leader of the Opposition, the then Prime Minister, was always referring to international factors. How many times were the balance of payments figures explained away by, for instance, the Suez Canal's being shut. Even the right hon. Gentleman, on occasions, sought with less justification to excuse the rate of inflation by referring to the world-wide problems of rising prices. But his attitude to economic news was always selective: economic success came from himself but bad news was an act of God.

The present Government have reaffirmed their commitment to contain inflation. We are embarked on a programme that will bring us the growth which has eluded us for so long, and for that reason this Government are entitled to the support of this House.

8.51 p.m.

Mr. William Hamilton (Fife, West)

It is perhaps appropriate in a debate of this kind that a merchant banker should be followed by the simple son of a coal miner. Because that is what this debate is about. It is about failure—about the deception and fraud perpetrated by this Government on the electorate in 1970. This document, "A Better Tomorrow", on which they won the election, is replete with lies, but it is the prospectus on which they won the election, a prospectus which they knew to be false, which they knew could not be implemented.

Nevertheless, the British people believed them and the British people voted for them on the strength of it. There are large numbers of Conservative Members holding marginal seats who will be out at the next election. Governments lose elections. Oppositions seldom win them. That will probably be the case at the next election.

The Government are quite right to say to us, "What are your proposals?" We are formulating them now.

Mr. Tugendhat

A bit late.

Mr. Hamilton

At least they will be honest. This Conservative document is not honest. Let me read out from it: Britain now faces the worse inflation for twenty years. It did not. It is worse now than it ha been for 50 years. The document said: Our theme is to replace Labour's restrictions with Conservative incentive. We utterly reject the philosophy of compulsory wage control. We have got it. In whatever field of policy we care to take, the Government's achievement is in flat contradiction to what was promised, in flat contradiction to the promises on which they won the election.

The most realistic speech, and one of the shortest—and perhaps it was the better for that—was the maiden speech of my hon. Friend the Member for West Bromwich (Miss Boothroyd). She has recently returned from the hustings. There has been a lot of sophisticated talk here about the floating pound, about the international monetary situation, about commodity price indices and the rest. No wonder the British public are disillusioned with that kind of talk coming from here. What they understand and what they read about every day in the newspapers is that we live in an unfair, unjust, extremely greedy, grabbing capitalist society where everybody grabs what he can.

The British public read about the dealings in Lonrho. They read about Lord Lambton and Lord Jellicoe. They read about the immorality and the greedy, grubby, selfish face of capitalism—and the merchant bankers do very well. They have not suffered from inflation. The people who have suffered most are not the very poor—although they have suffered enough—but the small savers who are spoken of in the Page Report, which has been played down by the Government. The unsophisticated saver who puts away a few bob a week in savings stamps has been robbed daily over the last quarter of a century, and that process has got worse under this Conservative Government. The simple, honest people know that the dishonest—the speculators—are getting away with it. That, in simple terms, is how ordinary people see our society developing.

The rich are getting richer because they know their way about. They know where are the Cayman Islands and all the other tax havens. They have good accountants who can fiddle their expenses. The ordinary fellow under PAYE has his tax deducted before he sees a penny of his wages.

My right hon. Friend the Chairman of the Parliamentary Labour Party said some years ago that there were two classes of taxpayers, the "pay-as-you-earn "and the "pay-as-you-like". That is still true. We saw it in the Lonrho affair. Hon. Members of the House were involved in the Lonrho affair—the Chairman of the 1922 Committee was right up to the neck in it. There is one now standing at the Bar. He said outside, with great glee, "You can get justice if you pay for it". One can get justice if one pays for it too. That is what he got—

Sir Gerald Nabarro (Worcestershire, South) rose—

Mr. Hamilton

The hon. Gentleman has just this minute come into the House—

Mr. Patrick Cormack (Cannock)

On a point of order, Mr. Deputy Speaker. Is it in order for the hon. Member for Fife, West (Mr. William Hamilton) to make snide personal accusations against hon. Members and not give them the opportunity to reply?

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

Order. It is unwise to canvas personal matters of this sort without a motion.

Mr. Hamilton

The debate up to now has been far too tame. I intend in the last few minutes to try to raise the temperature. I am making a positive contribution to the debate, which has long been absent.

The Government are under sentence of death. As soon as they have the guts to go to the people, the people will give them the answer. Six hundred of them voted for the Government in the Manchester Exchange Division, yet the Prime Minister has the cheek to stand at the Box this afternoon—being away from his "Morning Cloud"—and to say that the British people are behind him—all 600 of them! If he is so convinced, let him call for an election this autumn. He knows and we know that our society has got more unfair in the last three years than it has in the last quarter of a century. It is certainly now more divided that it has been for the past 30 or 40 years—and it has been divided by a Government who said that they would create one nation.

Inflation is hitting hardest the people who can afford to suffer it the least. There is not a single Conservative Member who has been hit by inflation. [HON. MEMBERS: "Nonsense".] Hon. Members opposite do not know what they are talking about. They have only to talk to the ordinary wage earner, the man on £20 or £30 a week, to know how he and his family are suffering.

All the noises we hear from the Government about protecting poorer people by improving the family income supplement is simply not good enough. That was one of the biggest frauds perpetrated by this Government. One Government Minister said he would be depressed if less than 85 per cent. of those entitled to the supplement did not take it up. But it is very much less than that, and only 65 per cent. of the people involved are taking up the supplement —which means that nearly half are not taking it up.

If the Prime Minister and his Government do not do something about family allowances and about the rent Acts, if they do not try to protect, without means-testing, those who are suffering most from the kind of inflation which the Tory Government have inflicted on our people, the Government will get what they deserve. And they will get it as soon as they have the guts to go to country.

9.3 p.m.

Mr. Edward Short (Newcastle-upon-Tyne, Central)

I first wish to congratulate the two hon. Members who have chosen this debate to make their maiden speeches. I refer to my hon. Friends the Members for West Bromwich (Miss Boothroyd) and Westhoughton (Mr. Stott), both of whom made excellent speeches. I hope that we shall hear from them often in the House.

The debate was opened for the Government by the Prime Minister, who has just returned to the Chamber. I am glad that he is here, because I told him that I was going to talk a great deal about him. The right hon. Gentleman's speech was 53 minutes of nothing. I wonder whether this man is real. In listening to him today I received the overwhelming impression that this was Mike Yarwood imitating Ted Heath. This Prime Minister is not real; he is plastic. He has raked up more alibis in the last three years than Agatha Christie did in three decades.

The Prime Minister's speech was without compassion or comfort. It did not even contain a promise to the people whom he deceived three years ago. He offered no additional help for the poor or the unprotected. It was not a speech about people at all—no care, no compassion, no concern for the hardship he has caused for so many people by his incompetence.

Food prices, apparently, are an ugly rumour started by the poor and the Opposition. The right hon. Gentleman is not a Prime Minister; he is a caricature of a Prime Minister. He gives no leadership to Britain and no comfort to the people. There was not even an apology to the people who trusted him and who have been deceived by him.

This debate is on the question whether the House has confidence in this Government and this Prime Minister to create a fair society. I want to talk mainly about people. The present Government have two records to their credit—if "credit" is the right word. They have presided over, and largely caused, the steepest rate of inflation in our history. Secondly, they have carried out the most massive redistribution of incomes to the rich in this century.

In "A Better Tomorrow" on which the Prime Minister won the election he said: We will reduce taxation…. We will concentrate on making progressive and substantial reductions in income tax. These reductions will be possible because we will cut out unnecessary Government spending and because we will encourage saving. The Government have cut taxation. Their own figure is £3,000 million per annum, and that is the figure that I shall use. In order to do so they have, as they promised, concentrated on income tax. But because they have concentrated on income tax, the benefit gained from the cut by individuals has been in direct proportion to their incomes. The well-to-do have got a great deal out of it. The poorest of the poor have got nothing out of it. But although the tax cuts have concentrated largely on income tax. in the main they have not been paid for by the promised massive cuts in Government spending but by borrowing—at least £4,000 million this year, let alone the balance of payments—and also by a series of mean, nasty, miserable little cuts which, had they been selected to produce the minimum of saving and the maximum hardship for ordinary people. could not have been bettered.

Let me remind the Chancellor of the Exchequer of a little document published in October 1970 entitled "New Policies for Public Spending". Those policies included the ending of free milk in primary schools, the ending of cheap welfare milk—this by the housewife's friend who sits nodding his head on the Treasury bench—increasing dental charges and prescription charges, winding up the Consumer Council, and cutting out such bodies as the rural development boards.

These two elements of Government policy—concentrating on income tax and paying for the tax cuts by borrowing— have been the major cause of our appallingly high rate of inflation in the past three years which is causing the most acute hardship to people—not just poor people but people on average and below-average earnings.

In addition to this, in their early days the Government quite deliberately encouraged price increases. How often did we hear it said that people should pay realistic prices for their food?

Inflation today is not only acute. 1 expect that all hon. Members have detected a change of mood in the country over the past few weeks about inflation. There is real fear in the country about inflation. The Prime Minister grins. He has £400 a week. Inflation is a joke to him. The Chancellor of the Exchequer as a matter of deliberate policy has accelerated inflation, but the nature of his tax cuts has insulated the better-off from its effects. The price of food does not matter to anyone earning £80 a week, or £400 a week, as the Prime Minister does, but it matters a great deal to anyone earning only £15 a week.

The Chancellor of the Exchequer has tried to conceal the biggest ever redistribution of income by rationalising the tax system and by the claim that we hear so often—we heard it again today from the Prime Minister—that the Government have cushioned the most needy members of society against the worst effects of their policy by means of selective benefits.

Such monumental reforms as the unification of income tax and surtax and the substitution of VAT for selective employment tax and purchase tax—I believe that we are still paying all three—are not much comfort to the housewife trudging from shop to shop trying to save a few coppers. Has the Prime Minister ever seen old people going from shop to shop with a handful of coupons for special offers? I expect the Government call it "shopping around".

When we look at the actual value of the whole package of means-tested benefits, invalidity allowances, age-related pensions, extended old persons' pensions, improvements for the chronic sick, two-tier attendance allowances for the severely disabled, and even throw in family income supplement, we welcome them all, but they amount only to 5 per cent. of the £3,000 million which the Chancellor of the Exchequer has dispensed. All of them are welcome. But if the Government wanted to redistribute £3,000 million of purchasing power surely they could have found more than 4 per cent. to give to the most needy groups of all in our community. The Chancellor has given that to the poorest and 22 per cent. to the richest group in the community. Even if we take the whole 46 means-tested benefits together, they amount to only 16 per cent. of that £3,000 million.

But the Prime Minister's principal fig leaf in the cushioning claim is the assertion, which he made again today, that the Government have not only protected pensioners against the effects of their policy, but that in October the pensioners will actually have gained 25 per cent. in their standard of living since the Government came into office.

If the Prime Minister would come to my constituency and talk to the old people there he would understand how utterly phoney this is. Imagine the old lady who has saved up and purchased her own house. She is not eligible for a supplementary pension. She has to live on her retirement pension. Pensioners today who have to live on their retirement pensions, even with supplementary pensions, simply cannot afford to keep themselves warm and well-fed.

The claim about the 25 per cent. is false for three reasons. I shall explain what they are. Today, the Prime Minister claimed that from November 1969 to October 1973, when pensions go up, they will have risen by 55 per cent.—pensions ought to go up every month, not every year, under this Government—and that the cost of living will have gone up by only 30 per cent. I think that today the Prime Minister said 35 per cent. This is not true. The cost of living had gone up by 30 per cent. in March this year, and there is another six months of inflation to add. By October the retail price index is almost certain to indicate a rise of at least 40 per cent. That reduces the pensioner's real increase from 25 per cent. to 15 per cent.

But that is not the end of the story. In making this dishonest claim the Prime Minister uses the ordinary retail price index—he attempted to justify that today—not the special pensioners' index. The spending pattern of the pensioner is quite different from that of the ordinary householder. For example, pensioners do net often buy second-hand cars. If the pensioners' index is used instead of the ordinary retail price index the 15 per cent. is reduced to 10 per cent.

Again, that is not the end of the story. Even the pensioners' index is defective, because it excludes the increasing cost of housing. The recent family expenditure survey showed that on housing, pensioners' households spend almost as much as, and sometimes more than, the average household. Between November 1969 and March 1973 rent and rates increased by 36 per cent.

These three factors, about which the Prime Minister and the Secretary of State for Social Services—who is not here—keep very quiet, show that pensioners will have suffered at least a 45 per cent. increase in their cost of living by October. I have not attempted to quantify the third of those factors. Therefore, their 55 per cent. rise by October is worth, in real terms, £154 for the single pensioner and £2.42 for a couple over four years. So their magnificent annual share of three years of Tory prosperity amounts to a weekly increase of 38p per year for a single person and 60p per year for a married couple. What a commentary on the Government's claims to fairness in helping the poorest and the weakest members of society! Where is their share of the 5 per cent. growth? Where does the 5 per cent. growth go anyhow? The workers are not getting it. The pensioners are not getting it. What has happened to it?

Almost 1 million non-pensioners are so poor that they are getting supplementary benefits. This group and their dependants, together with the pensioners who get supplementary pensions, amount to 5 million people. In addition, it is estimated that 500,000 more pensioners are entitled to the supplementary pension but do not claim it, and that 350,000 people are entitled to supplementary benefit but do not claim it. So, including pensioners and dependants, we have the astounding figure of 6½ million people in our society who come within the official definition of poverty. One person in eight in our society is living in the official definition of poverty. The gulf between them and the more affluent has been enormously increased by the Chancellor's policy, and it is increasing every day that the Government stay in office.

The House will have seen an article in today's paper entitled "The Hungry Ones". It says: More than 1,500,000 of Britain's families arc not getting enough to eat, and so on. The number of poor is much greater than that alarming figure, and it is an indictment of our society that there are still vast numbers of low-paid workers and others who, with their families, are living in what we must call poverty in 1973 although they may not fall within the official definition.

In April last year—these are the latest figures published-2 million adult workers had a gross pay of less than £22 a week, and here, as in most other things, there is a gross regional imbalance. Most low-paid workers are in the development areas in the regions. At present, 46 per cent. of farm workers, 45 per cent. of catering trade workers, 37 per cent. of male nurses and a vast number of women are low paid. To find a cushion for them the Government went back to 1795, when the magistrates, at a place called Speenhamland, in Berkshire, made up to subsistence level the wages paid by the local farmers—FIS in the eighteenth century.

Only 84,000 people are claiming FIS, and so far it has not even dented the problem of poverty among low-paid workers. So far as we can tell, the poorest families of all are among the non-claimants. The current FIS rate is £21 for a worker with one child. The single worker and the married childless worker get nothing. A married worker with one child gets the difference between £21 and his wage. If a man earns £20 a week, and if he has one child, FIS amounts to the magnificent sum of 50p, and a single man gets nothing. [An HON. MEMBER: "That is more than you gave them."] But they could live during the time of the Labour Government.

Mr. Peter Tapsell (Horncastle)

Will the right hon. Gentleman explain how he accounts for his claim that 1½ million people are not getting enough food to eat and yet only 86,000 have bothered to apply for FIS?

Mr. Short

I suggest that the hon. Gentleman reads the report to which I have referred.

There is another aspect of FIS—[Interruption.] The Chancellor wants to speak, and I shall finish what I have to say. FIS is one of the most potent elements in the poverty trap because no improvement in the rates or scales of FIS can alter the problem of a small pay rise taking earnings above the cut-off rate. On his own figure the Chancellor had £3,000 million to dispense. He looked around Britain, saw 2 million low-paid workers and decided that their share would be £12 million out of the £3,000 million, and to the 1 per cent. of the population who earn more than £5,000 a year he gave £750 million.

Not only have the poor not been cushioned and not had anywhere near their fair share of the nation's wealth, but the effect of Government policy almost daily makes their lives and the lives of all working people with below-average incomes more difficult, and increases the gulf between rich and poor. Let me briefly give five examples. First, the floating pound—or sinking pound—increases corporate profits derived from exports and at the same time pushes up food prices and depresses real earned incomes. So does the denial of access to cheap food by import duties. [HON. MEMBERS: "Where?"] The Prime Minister doubted this today, but in the few hours since he spoke I have acquired a list. No fewer than 27 categories of food are now subject to import duties or import levies. Hon. Members can look in HANSARD for 14th June to find them. These are now denying us access to cheese and butter markets, and to markets all over the world—[Interruption.] Regarding poultry and pig products, I shall inquire of the Polish and American Governments, and write to the Prime Minister. If I am wrong, I shall say so. But the case has been overwhelmingly made by these figures and by the speech of my right hon. Friend the Member for Battersea, North (Mr. Jay). If hon. Members want examples, there is a 40 per cent. levy on butter. It varies, but that is the latest of which we know. This denies us access to Australian butter. There is a £220 per ton levy on cheese. That denies us access to Canadian cheese. There are dozens, of examples of the same thing.

Secondly, VAT is hitting the poor infinitely harder than the well off. Let us not hear the nonsensical argument that the pensioner can cut his VAT bill by abstinence. That is an extension of "Godber's law"—if one does not buy anything, one does not pay any VAT. Most pensioners have cut their expenditure to an absolute irreducible minimum.

Thirdly, in the last three years there has been an obscene property speculation in Britain. This has been entirely at the expense of wage earners. The Chancellor's device, announced in his Budget, was derisory. The Times said: Charge for hoarding will not hurt speculators. The day after the Chancellor made his announcement, all property shares shot up like mad. From early 1971 to May 1973 bank advances to property speculators amounted to £1,500 million. After the Bank of England asked for restraint in this credit, they rose by another £500 million. In the main, this is a purely non-productive investment. Its only effect is to push up the price of existing property. It does not increase the rate at which housing becomes available; it reduces it. Its only effect is to siphon off income from wage earners to speculators.

Fourthly, the Government's prices and incomes policy also increases corporate profits at the expense of real earned incomes. The Prime Minister talked about his freeze. It is very interesting to see who got what during the freeze. There were some very interesting figures in a recent issue of the Department of Employment Gazette which show the amazing fact that during the freeze home-produced goods manufactured from home-produced raw materials rose in price by 2.5 per cent., while goods made from imported raw materials fell by 2.3 per cent. That certainly casts doubt on the current bogy of world prices, which has succeeded the trade union bogy, which is not now creditable.

From November 1972 to April 1973, in the freeze, there was without doubt a cut in the real standard of living for the majority of workers in this country. It has been variously estimated at between 0.5 per cent. and 2.7 per cent.; but it is probably about 1.5 per cent. Without doubt there will be a further fall during phase 2.

It was at the end of the period of freeze on wages that the Chancellor had the cheek to distribute £300 million to the richest taxpayers, who own most of the capital anyway. Can any self-respecting trade union leader be criticised for doubting the good faith of a Government who act with such contemptible cynicism?

I turn finally to the Housing Finance Act. This is clearly a major instrument in the Government's policy of redistribution. It is admitted to be such by the Government. In this case the redistribution involves the council tenant, the private tenant and the owner-occupier. I wish to make absolutely clear that my colleagues and I do not object to, but welcome, help to tenants of private rented accommodation. The fact that it is now necessary to give this help is further proof, if any were needed, that landlordism is no longer a credible way of satisfying the housing need. Nor do we object to the owner-occupier getting help to buy his house. That is why we introduced the option mortgage scheme, which the next Labour Government will make universal.

We object to the council tenant's being made to pay for all of this. There are exceptions, but on the whole the council tenant cannot, under the Government, afford to become an owner-occupier. The average mortgage repayment today is £76.82 and the average deposit needed to buy a house, according to the latest Nationwide figures, is £3,225, which most council tenants cannot accumulate.

The Prime Minister

Is the right hon. Gentleman prepared to be put to the test and say whether his party and Labour councils will give council tenants the opportunity of buying their houses?

Mr. Short

We believe that it is utterly wrong to sell council houses in areas of housing stress. [An Hon. Member: "Humbug."] The hon. Member should talk of humbug. It is downright immoral for the Prime Minister to encourage councils to sell their houses in areas of housing stress.

These five aspects of the Government's current policy contribute to the depressing of living standards for the wage earners and, at the same time to the raising of living standards for the better off.

I wish to turn to another matter during the few minutes remaining to me. Prices and houses are important, but there is more to life than these two topics. The Government are not only redistributing wealth; they are also redistributing opportunity. I refer to their education policy. This debate is about a fair society, and an education policy is perhaps more relevant to a fair society and the quality of life than are most other services. The Secretary of State, who is the most reactionary Minister of Education of the century, has for three years used all her powers—and abused some of them—to prevent the ending of the 11-plus selection by local authorities. This is an evil system, which is inaccurate, divisive and wasteful of natural ability. There is no longer any argument about the need to end selection, even amongst Conservative local authorities, yet no one has told the Secretary of State. She sails merrily along, firing broadsides into any scheme that will give all children, especially poor children, the chance to develop their potential to the full. Because of her activities in the past three years, tens of thousands of children in Britain have each year to be branded as failures when they are no such thing. To tell a child that he is a failure often makes him one. This is an immoral system, perpetuated by a bigotted reactionary Tory Secretary of State. It is her major device to prevent children from State schools developing their potential to the full. But it is not the only device. The recent White Paper proposes to cut by half the number of teachers in training. The Secretary of State has already started on this process. This will not affect the independent schools; it will not affect the small teaching groups in schools like Eton and Harrow, but it will condemn State primary schools to classes of 40 and State secondary schools to classes of 30 in 1981. This is at a time—[Interruption.] I know that the hon. Gentleman is not interested in this, but many parents are.

The Secretary of State is doing this at a time when every trend in society calls for children to be taught as individuals. This is true whether we look at the changes in industry or at the changes in such things as attitudes towards morality in our society. How can our teachers give individual attention to their children in classes of this size? The Secretary of State, by her policy, is preventing our teachers from making their teaching relevant to the modern world.

Nor is that all. In her White Paper she is proposing to abandon the criteria we have used for some years for entry to the universities. The Department of Education and Science itself estimated that by 1981 there would be 835,000 students qualified—

Mr. Peter Rees (Dover)

On a point of order, Mr. Speaker.

Hon. Members

Sit down!

Mr. Speaker

Order. I want to establish whether it is a point of order.

Mr. Peter Rees

If I were lucky enough to catch your eye, Mr. Speaker, would I be in order to discuss the White Paper on education?

Mr. Speaker

There is no chance of the hon. and learned Gentleman's catch-my eye in this debate.

Mr. Short

The Department of Education and Science estimated that by 1981, 835,000 places would be required. The Secretary of State is planning for 750,000—a quarter of a million too few. Clearly the Secretary of State thinks that the time has come to stop too many children from State schools from going on for higher education. Not content with these three negative policies—[Interruption.]

Mr. Speaker

Order. Is it not possible for both sides of the House to listen—[HON. MEMBERS: "Oh!"]—to arguments with which they do not agree in comparative silence?

Mr. Short

Not content with these three negative policies, the Secretary of State has given more financial help to the direct grant schools and the Chancellor has given help to the parents in independent schools. This has been paid for by withdrawing milk from primary schools.

These four aspects of Tory education policy are clearly and deliberately aimed at redistributing educational opportunities just as surely as the Chancellor's policy is aimed at redistributing wealth and income.

Throughout this debate, in speech after speech, and from the Prime Minister's speech most of all, there has emerged the picture of a Government elected on fraudulent policies. Not only were they elected on fraudulent policies; they have abused the confidence of the electorate by intensifying the imbalance of living standards and opportunities which defaces our society in Britain. Their three years in office have seen a further steady polarisation of Britain into two nations—one which bears the burden of inflation, the other which is insulated against it; one which constantly improves the quality of life, and the other for which life is a series of dull, unsatisfying jobs, unskilled jobs, ill-paid jobs, spells of unemployment, a struggle to make ends meet, poor educational opportunities, poor environment, and insecurity.

The Opposition believe that this polarisation has gone so far and so deep that we shall never create one nation in Britain until we accord to every human being equal importance, equal dignity, and an equal right to a full and satisfying life. To do so will involve major structural changes in our economy, in our social services—especially in education—in our tax system, and, perhaps most of all, in our distribution of wealth, and not least of all in our attitudes of mind.

There is no hope of a radical change of attitudes of mind or of the economy, and there is certainly no hope of a change in the education system under this Government. There is no hope of change, because the Government want two nations—a nation of rich and a nation of poor; a nation of educated and a nation of uneducated; a nation of privileged and a national of unprivileged.

That is what Toryism is all about—the unequal distribution of wealth and opportunity. That is why neither we nor the country have any confidence in the Government to create a fair society.

9.35 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber)

Once I learned that the debate was to be wound up by the Deputy Leader of the Opposition I realised that the Labour Party was determined to maintain a low, some would say an invisible, profile. We have not been disappointed. For a censure debate it has been remarkably quiet. At one stage there was only one person on the Opposition Front Bench—and he was a junior Whip—listening to this debate on an Opposition censure motion.

However, I have the pleasure at the outset of congratulating the hon. Member for West Bromwich (Miss Boothroyd) and the hon. Member for Westhoughton (Mr. Stott) on their maiden speeches. The hon. Member for West Bromwich spoke with considerable knowledge of the industry in her new constituency. She approved of the principle of threshold agreements and she said—I do not think I am being unfair—one or two things which some might say bordered on the controversial. Nevertheless, like me she comes from Yorkshire, and I give her a particular welcome. The hon. Member for Westhoughton also made a spirited and well-delivered speech and he had something to say about living standards. I shall come back to this point. However I congratulate both hon. Members and say that we look forward to listening to them again.

Mr. William Price (Rugby)

That is more than we can say about the right lion. Gentleman.

Mr. Barber

Several speakers, including the Leader of the Opposition, have referred to living standards and I want to refer to that, too. My right hon. Friend the Prime Minister made clear this afternoon why we reject the Opposition's philosophy of subsidising those with above-average earnings from paying fair rents and doing so with subsidies which will be paid for by the self-same people through taxation. There is therefore no question of abandoning the next step towards fair rents, which is due in October. We shall continue our policy of giving special help to those tenants who need it. In April we increased the needs allowance under the national rent rebate scheme by £3.50 a week. As a result, a married man with two children living in a council house, with an average or above-average rent and earning £35 a week, would not normally be paying more rent on the present basis by the end of October this year than he was paying before April, even though the rent of his dwelling will have increased. Many tenants with the rebate will be paying less rent.

The Government now propose to give further help by making a further increase in the needs allowance from October 1973. We are proposing an increase of £1.50 a week for a single tenant, £2.50 for a married couple and an additional 25p for every dependent child. My right hon. Friends will immediately consult the Advisory Committee on Rent Rebates and Rent Allowances about these proposals with a view to laying the necessary amending regulations before the House. The broad effect will be that most of the 1 million council and private tenants not on supplementary benefit but who are at present receiving a rent rebate or allowance will get a reduction in their rent averaging about 45p a week. For those of them who are due for an increase in the rent—

Mr. Skinner rose—

Mr. Barber

I want to complete this passage first, and then the hon. Gentleman is the one man to whom I will willingly give way.

For those who are due for an increase in the rent of their dwelling in October, the effect of the increased needs allowance will be that on average they will pay about 25p less in rent after the rent increase in October than before it. Some council and private tenants will become eligible for a rebate or allowance for the first time.

The increases will give special help to families with children. The great majority of lower-paid workers with children are tenants, and the increase in the needs allowance for each dependent child is therefore of direct help to those families. For instance, a married couple with two dependent children and an income of £35 a week, living in a council house at a rent of £3.50, now pay the whole £3.50 themselves. Under the new proposals they will pay only £2.80. If the rent of their house goes up by 50p to £4, they will pay only £3 themselves, 50p less than now. We have no doubt that this is by far and away the best way to help those people in need.

Mr. Skinner

The Chancellor has been very selective with his carefully worked out examples of those who will benefit as a result of the increase in the needs allowance. He will agree that for a single man receiving an extra £1.50 on the needs allowance a swift calculation, even by his unimaginative mind, will produce only three times 81p, which means 25½p when the increase is 50p in October. Therefore, he will be that much worse off as a result.

The other point the Chancellor should bear in mind—[HON. MEMBERS: "Too long."]—is that when the Prime Minister asked the TUC to meet him a few weeks ago both he and the Chancellor made it abundantly clear that if the TUC came to Downing Street it would be allowed to discuss absolutely anything it wished. [HON. MEMBERS: "Speech By announcing this decision tonight, the right hon. Gentleman has ruled out any reductions that can take place under the Housing Finance Act.

Mr. Barber

On the first point the hon. Gentleman is wrong. On the second point, which Opposition Members cheered, the fact is that if we had not made the announcement before the House rose it could not have been operative in October. That is the sole reason it was made now.

Practically every speech in the debate has been concerned with one or other aspect of the two principal objectives of economic policy—first, the determination to jack up our rate of economic expansion, as being the only means by which we or any nation can improve our prosperity, and, secondly, as a great trading nation in a situation in which the worldwide pace of inflation has speeded up dramatically, to take such action as is available to us to contain our domestic costs and prices consistent with—this is the important point—a policy of sustained growth.

I readily accept that it would be open to any Government to provide massive, across-the-board subsidies to hold down certain prices of food for rich and poor alike, but it is a complete illusion to pretend that this can be done without also levying massive, across-the-board increases in taxation.

I shall return to that theme, but first I hope that the whole House will accept that the benefit to the British people of pursuing a policy of economic expansion has been very great. I hope that in fairness the Opposition will also accept that, whatever the problems resulting from the unprecedented increase in world prices, over which we have no control, we have been able to secure for our people a far greater improvement in their real living standards than they, with their different policies, were able to achieve, when in office. This debate has crystallised the fact that on both sides of the House there is a deep, fundamental and wholly different approach to the problems which any British Government, Labour or Conservative, must tackle.

The Opposition motion refers to the creation of a fair and just society. What is most significantly omitted from the motion is any reference to the creation of national wealth, which is the prerequisite of such a society. That is not surprising when it is remembered that throughout the six years of Labour Government the economy grew on average at the rate of only 2½ per cent. a year. The trouble with Labour Governments is that they always begin to fight over the national cake before they have even begun to bake it.

It was a prime objective of the economic policy of the present Government to break out from the era of stagnation which resulted in our living standards falling further and further behind those of other industrialised nations. We have only to look at the various steps which have been taken during the last three years to recognise that that has been achieved.

Mr. Russell Kerr (Feltham)

Who wrote this rubbish?

Mr. Barber

On the basis which is common to both Governments of real personal disposable income, the standard of the British people has risen more in the past three years than in the last Labour Government's six years. [Interruption.] If right hon. and hon. Members will listen I shall give one of the most significant comparisons which can be made. The right hon. Member for Newcastle-upon-Tyne, Central (Mr. Edward Short) referred to those who arc on average industrial earnings. The fact is that after almost six years of Labour Government a family with two young children on average industrial earnings was in real terms only 80p a week better off-80p after six years. Since 1970, after three years of Conservative Government, the latest figures show that the same family is already better off in real terms, taking into account increases in prices, to the extent not of 80p a week but of £2.29 a week. In other words, average real earnings, despite the rise in the cost of living, have gone up almost three times as much in half the time.

Considerable reference was made by the Leader of the Opposition to food subsidies. He was asked certain questions. First, it is clear that not one hon. Member—this is also made clear by the document which was produced by the Labour Party—pretends for one moment that there is anything which we can do about the rise in world prices. But, say the Opposition, the Government must introduce food subsidies. The Government have never been doctrinaire about subsidies. We have at various times subsidised particular foods, such as milk, potatoes, and butter.

The nation should be under no illusion that if we were to go in for the sort of massive across-the-board subsidies which have been spoken of by the Leader of the Opposition and the Deputy Leader of the Opposition, subsidies benefiting rich and poor alike, such a burden would involve massive across-the-board increases in taxation.

If we introduced such subsidies we should be right back again on the old Socialist treadmill of ever-increasing rates of taxation. I quote part of a speech which the right hon. Member for Newcastle-upon-Tyne, Central made recently at Be1per. He said: Subsidies will be costly and will have to be paid for by re-imposing some of the taxes Mr. Heath has removed from the higher income groups. All right! Is that what the Labour Party would do? Would it reimpose some of the taxes removed from the higher income groups, and on them only? No one believes that, not even the Deputy Leader of the Opposition. Let the House listen to these words, which do represent the truth, from someone sitting on the Opposition Front Bench at this moment.

We have to be frank. … When a Labour Government is in office there will be relatively high levels of taxation and local rates and national insurance contributions…. We can no longer pay for higher expenditure just by soaking the rich. Now we know. Those were the words of the man who came top in the Shadow Cabinet elections last year—the right hon. Member for East Ham, North (Mr. Prentice).

Mr. Reg Prentice (East Ham, North)

As the right hon. Gentleman has quoted what I said, will he defend the social morality of the tax concessions which took effect in April in the context of a situation in which the pensioners and the lower paid are having to pay the highest food prices they have ever known?

Mr. Barber

All I can say to the right hon. Gentleman as far as that is concerned—[HON. MEMBERS: "Answer."] I am answering. As far as that is concerned, I believe, in the context of the massive reductions we have made, that what we did this year, as in previous years, is perfectly fair.

The Deputy Leader of the Opposition told us that with food subsidies there would be no need for an incomes policy. He mentioned a figure of "up to £500 million". Does he really think that a subsidy of a little over 15p a week per head of the population would dispense altogether with the need for an incomes policy? Such a proposition by the Deputy Leader of the Opposition is almost too ludicrous to merit consideration. I am not in the least surprised that the Shadow Chancellor, the right hon. Member for Leeds, East (Mr. Healey) decided to have nothing whatever to do with this debate.

What does all this talk by the Deputy Leader of the Opposition of the cost of his proposed food subsidies mean when he says that it would be "up to £500 million"? His proposals are not the proposals of the Leader of the Opposition, whose speech today, if I may say so, was not quite up to the high standard of his speech yesterday on Mozambique. He is not limiting the subsidies which he wants to see to those items set out so carefully by the Deputy Leader of the Opposition. He, unlike his deputy, says that he also wants to have subsidies on meat. He mentioned beef, pork and lamb specifically. Where does his deputy stand on that? Where does the Shadow Chancellor stand on that? They both know that one could not do it for £500 million a year.

Mr. Harold Wilson

Where does the Chancellor stand on that?

Mr. Barber

We are opposed to it for the reasons I have given.

That is not all, because the Leader of the Opposition said today nothing whatever about fish. Yet last Friday on television to the nation he said that he would consider subsidising fish. What does the Deputy Leader of the Opposition think about that? What does the Shadow Chancellor think about that? I will tell the House what I think. We are not prepared to go in for the massive increases in taxation which would be necessary—but, to be fair to the Leader of the Opposition, he has made it abundantly clear that so far as he is concerned there is no such limit as £500 million. The cost, he says, is for decision not now but later.

What would the joint policy of the right hon. Gentlemen have cost over this past year? The Deputy Leader of the Opposition's subsidies of £500 million did not include meat and fish. But, assuming that he is right, and we then include what the Leader of the Opposition has said—that is, including carcase meat—and assuming that we could have kept to the price levels over the past year, that would have cost the British taxpayer a further £500 million a year. If one includes fish, which the right hon. Gentleman told the electors the Opposition would consider, the cost would total some £1,100 million in a year which is just about the same amount—

Mr. Harold Wilson rose—

Mr. Barber

I will give way in a minute.

Mr. Speaker

Order. Can we have four minutes of silence?

Mr. Barber

I have said that I will give way to the Leader of the Opposition. He is fair, and I know that he will not take up the whole time. What I am saying is that the joint proposals of the Leader and the Deputy Leader the Opposition—[HON. MEMBERS: "Give way" If hon. Members want me to give way, they have only to wait. The joint proposals of the Leader and

Deputy Leader of the Opposition, if they had kept prices stable over the past year, would have cost £1,100 million. To put it into perspective, that is almost the same as the full year cost of the cut in income tax which I made last year and which provided every taxpayer throughout the land with an income tax cut of £1 a week. The weekly wage earner had better know what would be in store for him with the return of a Labour Government. It would be back to 1968 with a vengeance.

Mr. Harold Wilson

The right hon. Gentleman calculates a cost of £1,100 million. Will he tell me and the House how much has accrued in each year of his Government's administration to the land and property speculators? If he were to take that back from them, he could pay for these proposals.

Mr. Barber

The right hon. Gentleman knows perfectly well from the answer of his right hon. Friend the Member for East Ham, North that that is not so.

Inflation is rightly a matter of great concern, but that is not the reason why the Labour Party have instigated this debate. The real reason is simply that the Labour Party will miss no chance to run this country down, to run down its achievements. The hallmark of the Labour Party is failure. Their term of office reeked of failure. In Opposition, they are desperately willing failure. But the British public reject the philosophy of failure peddled by the Labour Party. This Government have a record in which the House will tonight express its confidence. So too, when the time comes, will the British people.

Question put,

That this House has no confidence in the ability of Her Majesty's Government to control the rising price of food and the cost of other essentials, to maintain the value of the pound at home or abroad, and to create a fair and just society.

The House divided: Ayes 288, Noes 314.

Division No. 206.]	AYES	[10.0 p.m.
Abse, Leo	Bagler, Gordon A. T.	Bidwell, Sydney
Allaun, Frank (Salford, E.)	Barnes, Michael	Bishop, E. S.
Allen, Scholefield	Barnett, Guy (Greenwich)	Blenkinsop, Arthur
Archer, Peter (Rowley Regis)	Barnett, Joel (Heywood and Royton)	Boardman, H. (Leigh)
Armstrong, Ernest	Baxter, William	Booth, Albert
Ashley, Jack	Beaney, Alan	Boothroyd, Miss B. (West Brom.)
Ashton, Joe	Senn, Rt. Hn. Anthony Wedgwood	Bottomley, Rt. Hn. Arthur
Atkinson, Norman	Bennett, James(Glasgow, Bridgeton)	Boyden, James (Bishop Auckland)
Bradley, Tom	Hart, Rt. Hn. Judith	Morris, Rt. Hn. John (Aberavon)
Broughton, Sir Alfred	Hattersley, Roy	Moyle, Roland
Brown, Robert C. (N'c'tle-u-Tyne, W.)	Healey, Rt. Hn. Denis	Mulley, Ht. Hn. Frederick
Brown, Hugh D. (G'gow, Proven)	Heffer, Eric S.	Murray, Ronald King
Brown, Ronald (Shoreditch & F'bury)	Hilton, W. S.	Oakes, Gordon
Buchan, Norman	Hooson, Emlyn	Ogden, Eric
Buchanan, Richard (G'gow, Sp'burn)	Horam, John	O'Halloran, Michael
Butler, Mrs. Joyce (Wood Green)	Houghton, Rt. Hn. Douglas	O'Malley, Brian
Campbell, I. (Dunbartonshire, W.)	Howell, Denis (Small Heath)	Oram, Bert
Cant, R. B.	Huckfield, Leslle	Orbach, Maurice
Carmichael, Neil	Hughes, Rt. Hn. Cledwyn (Anglesey)	Orme, Stanley
Carter, Rey (Birmingh'm, Northfield)	Hughes, Mark (Durham)	Oswald, Thomas
Carter-Jones, Lewis (Eccles)	Hughes, Robert (Aberdeen, N.)	Owen, Dr. David (Plymouth, Sutton)
Castle, Rt. Hn. Barbara	Hughes, Roy (Newport)	Padley, Walter
Clark, David (Colne Valley)	Hunter, Adam	Paget, R. T.
Cocks, Michael (Bristol, S.)	Irvine, Rt. He. Sir Arthur (Edge Hill)	Palmer, Arthur
Cohen, Stanley	Janner, Greville	Pannell, Rt. Hn. Charles
Coleman, Donald	Jay, Rt. Hn. Douglas	Pardoe, John
Concannon, J. D.	Jeger, Mrs. Lena	Parker, John (Dagenham)
Conlan, Bernard	Jenkins, Hugh (Putney)	Parry, Robert (Liverpool, Exchange)
Corbet, Mrs. Freda	Jenkins, Rt. Hn. Roy (Stechford)	Pavitt, Laurie
Cox, Thomas (Wandsworth, C.)	John, Brynmor	Pearl, Rt. Hn. Fred
Crawshaw, Richard	Johnson, Carol (Lewisham, S.)	Pendry, Tom
Cronin, John	Johnson, James (K'ston-on-Hull, W.)	Perry, Ernest G.
Crosland, Rt. Hn. Anthony	Johnson, Walter (Derby, S.)	Prentice, Rt. Hn. Reg.
Crossman, Rt. Hn. Richard	Johnston, Russell (Inverness)	Prescott, John
Cunningham, G. (Islington, S.W.)	Jones, Barry (Flint, E.)	Price, William (Rugby)
Cunningham, Dr. J. A. (Whitehaven)	Jones, Gwynoro (Carmarthen)	Probert, Arthur
Dalyell, Tam	Jones, T. Alec (Rhondda, W.)	Radice, Giles
Darling, Rt. Hn. George	Judd, Frank	Reed, D. (Sedgefield)
Davidson, Arthur	Kaufman, Gerald	Rees, Merlyn (Leeds, S.)
Davies, Denzil (Llanelly)	Kelley, Richard	Rhodes, Geoffrey
Davies, G. Elfed (Rhondda, E.)	Kerr, Russell	Richard, Ivor
Davies. Ifor (Gower)	Kinnock, Neil	Roberts, Albert (Normanton)
Davis, Clinton (Hackney, C.)	Lamble, David	Roberts,Rt.Hn.Goronwy(Caernarvon)
Davis, Terry (Bromsgrove)	Lamborn, Harry	Robertson, John (Paisley)
Deakins, Eric	Lamond, James	Roderick, Caerwyn E.(Bro'n&R'dnor)
de Freitas, Rt. He. Sir Geoffrey	Latham, Arthur	Rodgers, William (Stockton-on-Tees)
Delargy, Hugh	Lawson, George	Roper, John
Dell, Rt. Hn. Edmund	Leadbitter, Ted	Rose Paul B.
Dempsey, James	Lee, Rt. Hn. Frederick	Ross, Rt. Hn. William (Kilmarnock)
Doig, Peter	Leonard, Dick	Rowlands, Ted
Dormand, J. D.	Lestor, Miss Joan	Sandelson, Neville
Douglas, Dick (Stirlingshire, E.)	Lever, Rt. Hn. Harold	Sheldon, Robert (Ashton-under-Lyne)
Douglas-Mann, Bruce	Lewis, Arthur (W. Ham, N.)	Shore, Rt. Hn. Peter (Stepney)
Driberg, Tom	Lewis, Ron (Carlisle)	Short, Rt. Hn.Edward (N'c'tle-u-Tyne)
Duffy, A. E. P.	Lipton, Marcus	Short, Mrs. Renee (W'hampton,N.E.)
Dunn, James A.	Lomas, Kenneth	Silkin, Rt. Hn. John (Deptford)
Dunnett, Jack	Loughlin, Charles	Silkin, Hn. S. C. (Dulwich)
Eadie, Alex	Lyon, Alexander W. (York)	Sillars, James
Edelman, Maurice	Lyons, Edward (Bradford, E.)	Silverman, Julius
Edwards, Robert (Bilston)	Mabon, Dr. J. Dickson	Skinner, Dennis
Edwards, William (Merioneth)	McAliskey, Mrs. Bernadette	Smith, Cyril (Rochdale)
Ellis, Tom	McBride, Neil	Smith, John (Lanarkshire, N.)
English, Michael	McCartney, Hugh	Spearing, Nigel
Evans, Fred	McElhone, Frank	Spriggs, Leslie
Ewing, Harry	McGuire, Michael	Stallard, A. W.
Faulds, Andrew	Machin. George	Steel, David
Fernyhough, Rt. Hn. E.	Mackenzie, Gregor	Stewart, Donald (Western Isles)
Fitch, Alan (Wigan)	Mackle, John	Stewart, Rt.Hn. Michael (Fulham)
Fletcher, Raymond (Ilkeston)	Mackintosh, John P.	Stoddart, David (Swindon)
Fletcher, Ted (Darlington)	Maclennan, Robert	Stonehouse, Rt. Hn. John
Foot, Michael	McMillan, Tom (Glasgow, C.)	Stott, Roger (Westhoughton)
Ford, Ben	McNamara, J. Kevin	Strang, Gavin
Forrester, John	Mabon, Simon (Bootle)	Strauss, Rt. Hn. G. R.
Fraser, John (Norwood)	Mallalieu, J. P. W. (Huddersfield, E.)	Summerkill, Hn. Dr. Shirley
Freason, Reginald	Marks, Kenneth	Swain, Thomas
Galpern, Sir Myer	Marquand, David	Taverne, Dick
Garrett, W. E.	Marsden, F.	Thomas,Rt.Hn.George (Cardiff,W.)
Gilbert, Dr. John	Marshall, Dr. Edmund	Thomas, Jeffrey (Abertillery)
Ginsburg, David (Dewsbury)	Mason, Rt. Hn. Roy	Tinn, James
Gordon Walker, Rt. Hn. P. C.	Mayhew, Christopher	Tomney, Frank
Gourlay, Harry	Meacher, Michael	Torney, Tom
Grant, George (Morpeth)	Mellish, Rt. Hn. Robert	Tuck, Raphael
Grant, John D. (Islington, E.)	Mendelson, John	Urwin, T. W.
Griffiths, Eddie (Brightside)	Mikardo, Ian	Varley, Eric G.
Grimond, Rt. Hn. J.	Millan, Bruce	Wainwright, Edwin
Hatton, F.	Miller, Dr. M. S.	Walden, Brian (B'm'ham, All Saints)
Hamilton, James (Bothwell)	Milne, Edward	Walker, Harold (Doncaster)
Hamilton, William (Fife, W.)	Mitchell, R. C. (S'hampton, Itchen)	Wallace, George
Hamling, William	Morgan, Elystan (Cardiganshire)	Watkins, David
Hannan, William (G'gow, Maryhill)	Morris, Alfred (Wythenshawe)	Weitzman, David
Hardy, Peter	Morris, Charles R. (Openshaw)	Wellbeloved, James
Harper, Joseph		Wells, William (Walsall, N.)

White, James (Glasgow, Pollok)	Williams, Mrs. Shirley (Hitchin)	Woof, Robert
Whitehead, Phillip	Williams, W. T. (Warrington)
Whitlock, William	Wilson, Alexander (Hamilton)	TELLERS FOR THE AYES:
Willey, Rt. Hn. Frederick	Wilson, Rt. Hn. Harold (Huyton)	Mr. Walter Harrison and
Williams, Alan (Swansea, W.)	Wilson, William (Coventry, S.)	Mr. John Golding.
NOES
Adley. Robert	Elliott, R. W. (N'etle-upon-Tyne, N.)	Kilfedder, James
Alison, Michael (Barkston Ash)	Emery, Peter	Kimball, Marcus
Allason, James (Hemel Hempstead)	Eyre, Reginald	King, Evelyn (Dorset, S.)
Amery, Rt. Hn. Julian	Farr, John	King, Tom (Bridgwater)
Archer, Jeffrey (Louth)	Fell, Anthony	Kinsey, J. R.
Astor, John	Fenner, Mrs. Peggy	Kirk, Peter
Atkins, Humphrey	Fidler, Michael	Kitson, Timothy
Awdry, Daniel	Finsberg, Geoffrey (Hampstead)	Knight, Mrs. Jill
Baker, Kenneth (St. Marylebone)	Fisher, Nigel (Surbiton)	Knox, David
Baker. W. H. K. (Banff)	Fletcher-Cooke, Charles	Lamont, Norman
Balniel, Rt. Hn. Lord	Fookes, Miss Janet	Lane, David
Barber, Rt. Hn. Anthony	Fortescue, Tim	Langford-Holt, Sir John
Batsford, Brian	Foster, Sir John	Le Merchant, Spencer
Beamish, Col. Sir Tufton	Fowler, Norman	Lewis, Kenneth (Rutland)
Bell, Ronald	Fox, Marcus	Lloyd,Rt.Hn.Geoffrey(Sut'nC'field)
Bennett, Sir Frederic (Torquay)	Fraser,Rt.Hn.Hugh (St'fford & Stone)	Lloyd, Ian (P'tsm'th, Langstone)
Bennett, Dr. Reginald (Gosport)	Fry, Peter	Longden, Sir Gilbert
Benyon, W.	Galbraith, Hn. T. G. D.	Loverldge, John
Berry, Hn. Anthony	Gardner, Edward	Luce, R. N.
Biffen, John	Gibson-Watt, David	McAdden, Sir Stephen
Biggs-Davison, John	Gilmour, Ian (Norfolk, C.)	MacArthur, Ian
Bicker, Peter	Gilmour, Sir John (Fife, E.)	McCrindle, R. A.
Boardman, Tom (Leicester, S.W.)	Glyn, Dr. Alan	McLaren, Martin
Boscawen, Hn. Robert	Goodhart, Philip	Maclean, Sir Fitzroy
Bossom, Sir Clive	Gerst, John	McMaster, Stanley
Bowden, Andrew	Gower, Raymond	Macmillan,Rt.Hn.Maurice(Farnham)
Braine, Sir Bernard	Grant, Anthony (Harrow, C.)	McNair-Wilson, Michael
Bray, Ronald	Gray, Hamish	McNair-Wilson, Patrick (New Forest)
Brewis, John	Green, Alan	Madden, Martin
Brinton, Sir Tatton	Grieve, Percy	Model, David
Brocklebank-Fowler, Christopher	Griffiths, Eldon (Bury St. Edmunds)	Maginnis, John E.
Brown, Sir Edward (Bath)	Grylls, Michael	Marples, Rt. Hn. Ernest
Bruce-Gardyne, J.	Gummer, J. Selwyn	Marten, Nell
Bryan, Sir Paul	Gurden, Harold	Mather, carol
Buchanan-Smith, Alick (Angus,N & M)	Hall, Miss Joan (Keighley)	Maude, Angus
Buck, Antony	Hall, Sir John (Wycombe)	Maudling, Rt. Hn. Reginald
Bullus, Sir Eric	Hall-Davis, A. G. F.	Mawby, Ray
Burden, F. A.	Hamilton, Michael (Salisbury)	Meyer, Sir Anthony
Butler, Adam (Bosworth)	Hannam, John (Exeter)	Mills, Peter (Torrington)
Campbell. Rt. Hn. G. (Moray & Nairn)	Harrison, Brian (Maldon)	Mills, Stratton (Belfast, N.)
Carlisle, Mark	Harrison, Col. Sir Harwood (Eye)	Miscampbell, Norman
Carr, Rt. Hn. Robert	Haselhurst, Alan	Mitchell,Lt.-Col.C.(Aberdeenshire,W)
Cary, Sir Robert	Hastings, Stephen	Mitchell, David (Basingstoke)
Channon, Paul	Havers, Sir Michael	Moate, Roger
Chapman, Sydney	Hawkins, Paul	Molyneaux, James
Chataway, Rt. Hn. Christopher	Hay, John	Money, Ernie
Chichester-Clark, R.	Hayhoe, Barney	Monks, Mrs. Connie
Churchill, W. S.	Heath, Rt. Hn. Edward	Monro, Hector
Clark, William (Surrey, E.)	Heseltine, Michael	Montgomery, Fergus
Clarke, Kenneth (Rushcliffe)	Hicks, Robert	More, Jasper
Cockeram, Eric	Higgins, Terence L.	Morgan, Geraint (Denbigh)
Cooke, Robert	Hilley, Joseph	Morgan-Giles. Rear-Adm.
Coombs, Derek	Hill, John E. B. (Norfolk, S.)	Morrison, Charles
Cooper, A. E.	Hill, S. James A. (South'pton, Test)	Mudd, David
Cordle, John	Holland, Philip	Murton, Oscar
Corfield, Rt. Hn. Sir Frederick	Holt, Miss Mary	Nabarro, Sir Gerald
Cormack, Patrick	Hordern, Peter	Neave, Airey
Costain, A. P.	Hornby, Richard	Nicholls, Sir Harmer
Critchley, Julian	Hornsby-Smith,Rt. Hn.Dame Patricia	Normanton, Tom
Crouch, David	Howe, Rt. Hn. Sir Geoffrey	Nott, John
Crowder, F. P.	Howell, David (Guildford)	Onslow, Cranley
Davies, Rt. Hn. John (Knutsford)	Howell, Ralph (Norfolk, N.)	Oppenheim, Mrs. Sally
d'Avigdor-Goldsmid, Sir Henry	Hunt, John	Orr, Capt. L. P. S.
d'Avigdor-Goldsmid, Maj.-Gen. Jack	Hutchison, Michael Clark	Osborn, John
Dean, Paul	Iremonger, T. L.	Owen, Idris (Stockport, N.)
Deedes, Rt. Hn. W. F.	Irvine, Bryant Godman (Rye)	Page, Rt. Hn. Graham (Crosby)
Digby, Simon Wingfield	James, David	Page, John (Harrow, W.)
Dixon, Piers	Jenkin, Rt. Hn.(W'st'd & W'df'd)	Parkinson, Cecil
Dodds-Parker, Sir Douglas	Jennings, J. C. (Burton)	Peel, Sir John
Douglas-Home, Rt. Hn. Sir Alec	Jessel, Toby	Percival, Ian
Drayson, G. B.	Johnson Smith, G. (E. Grinstead)	Peyton, Rt. Hn. John
du Cann, Rt. Hn. Edward	Jones, Arthur (Northants, S.)	Pike, Miss Mervyn
Dykes, Hugh	Jopling, Michael	Pink, R. Bonner
Eden, Rt. Hn. Sir John	Joseph, Rt. Hn. Sir Keith	Pounder, Rafton
Edwards, Nicholas (Pembroke)	Kaberry, Sir Donald	Powell, Rt. Hn. J. Enoch
Elliot, Capt. Walter (Carshalton)	Kellett-Bowman, Mrs. Elaine	Price, David (Easlleigh)
	Kershaw, Anthony

Prior, Rt. Hn. J. M. L.	Shersby, Michael	Tugendhat, Christopher
Proudfoot,Wilfred	Simeons, Charles	Turton, Rt. Hn, Sir Robin
Pym, Rt. Hn. Francis	Sinclair, Sir George	van Straubenzee, W. R.
Quennell, Miss J. M.	Skeet, T. H. H.	Vaughan, Dr. Gerard
Ralson, Timothy	Smith, Dudley (W'wick & L'mington)	Vickers, Dame Joan
Ramsden, Rt. Hn. James	Soref, Harold	Waddington, David
Rawlinson, Rt. Hn. Sir Peter	Speed, Keith	Walder, David (Clitheroe)
Redmond, Robert	Spence, John	Walker, Rt. Hn. Peter (Worcester)
Reed, Laurance (Bolton, E.)	Sproat, lain	Walker-Smith, Rt. Hn. Sir Derek
Rees, Peter (Dover)	Stainton, Keith	Wall, Patrick
Rees-Davies, W. R.	Stanbrook, Ivor	Walters, Dennis
Renton, Rt. Hn. Sir David	Stewart-Smith, Geoffrey (Beiper)	Ward, Dame Irene
Rhys Williams, Sir Brandon	Stodart, Anthony (Edinburgh, W.)	Warren, Kenneth
Ridley, Hn. Nicholas	Stokes, John	Wells, John (Maidstone)
Ridsdale, Julian	Stuttaford, Dr. Tom	White, Roger (Gravesend)
Rippon, Rt. Hn. Geoffrey	Sutcliffe, John	Whitelaw, Rt. Hn. William
Roberts, Michael (Cardiff, N.)	Tapsell, Peter	Wiggin, Jerry
Roberts, Wyn (Conway)	Taylor, Sir Charles (Eastbourne)	Wilkinson, John
Rodgers, Sir John (Sevenoaks)	Taylor,Edward M. (G'gow,Cathcart)	Winterton, Nicholas
Rossi, Hugh (Hornsey)	Taylor, Frank (Moss Side)	Wolrige-Gordon, Patrick
Rost, Peter	Taylor, Robert (Croydon, N.W.)	Wood, Rt. Hn. Richard
Royle, Anthony	Tebbit, Norman	Woodhouse, Hn. Christopher
Russell, Sir Ronald	Temple, John M.	Woodnutt, Mark
St. John-Stevas, Norman	Thatcher, Rt. Hn. Mrs. Margaret	Worsley, Marcus
Sandys, Rt. Hn. D.	Thomas, John Stradling (Monmouth)	Wylie, Rt. Hn. N. R.
Scott, Nicholas	Thomas, Rt. Hn. Peter (Hendon, S.)	Younger, Hn. George
Scott-Hopkins, James	Thompson, Sir Richard (Croydon, S.)
Shaw, Michael (Sc'b'gh & Whitby)	Tilney, John	TELLERS FOR THE NOES:
Shelton, William (Clapham)	Trafford, Dr. Anthony	Mr. Walter Clegg and
	Trew, Peter	Mr. Bernard Weatherill.

Question accordingly negatived.